Idea on gold

I see that many hedge fund managers are long now on gold or gold trusts , etc. I think its not just hedging in classical term. We have big inflations expectations and doubtful market growth. If no risks will be converted in to reality we will see continue of market growth and gold growth too. Market will growth by better fundamentals, gold will growth by inflation expectations - if economy is began to recover - inflation wiil begin growing quick. If we dont see real economic recovering now, we will see second wave of recesion. It will mean more money to print again, bigger inflation in future, so market in this scenario will go down again, but gold after some down move, will grow even more quickly.

Contrarian idicator - put/call ratio. Betting against the crowd

Put/call ratio is widely use sentiment indicator, but i think it is anyway usefull coz its not derivative indicator which does not distort market information. We just see volume of call options versus volume of put options without distortion.
$PC (in esignal) - put/call ratio calculeted on CBOE. It is contrarian indicator. When the ratio is too small we have critical optimism on markets and soon we will see reversal of the market. It ofcoz working to find critical pessimism too.
Historically index options have a skew toward more put buying. This is because of the index put option hedging done by portfolio managers - this is also why the total put/call ratio is not the ideal ratio (it is polluted by this hedging volume). Recall that the idea of contrarian sentiment analysis is to measure the pulse of the speculative option crowd, who, on balance, is wrong. We should therefore be looking at the equity-only ratio for a purer measure of the speculative trader. In addition, the critical threshold levels should be dynamic, chosen from the previous 52-week highs and lows of the series, adjusting for trends in the data.
The smoothed(build MA4 or MA10) put/call ratio is useful good. Put/call ratios are best used in combination with other sentiment indicators and perhaps a price-based (i.e., momentum) indicator. More elaborate mathematical massaging of the data (i.e., de-trending by differencing the series) can also help.

Trading Idea with AXP

American Express (NYSE: AXP - option chain) shares are soaring higher today after the company reported a first-quarter profit of $361 million or 31 cents per share. AXP's adjusted profit came in at 32 cents per share, beating analysts' forecasts of 12 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AXP.

AXP opened this morning at $22.69. So far today the stock has hit a low of $22.05 and a high of $24.10. As of 11:25, AXP is trading at $23.74, up $2.77 (13.2%). The chart for AXP looks bearish and S&P gives AXP a negative 2 STARS (out of 5) sell ranking.

For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $17 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just two months as long as AXP is above $14 at June expiration. American Express would have to fall by more than 28% before we would start to lose money.

AXP has shown support around $18 recently.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in AXP.