This strategy was featured in the October 2007 issue of Active Trader magazine. The idea behind this system is to fade extreme Put/Call Ratio levels.

Note: CBOE static data provider can be used to easily download free historical and current EOD data for the CBOE Put/Call Ratios. To install, download it from the Extensions section:

CBOE Static Provider Extension

System rules:

1. Enter long tomorrow at the market if the CBOE total Put/Call Ratio is at or above 1.0.
2. Close long position tomorrow at the market when the ratio is at or below 0.6.
3. Enter short position tomorrow at the market if the CBOE total Put/Call Ratio is at or below 0.6.
4. Cover short position tomorrow at the market when the ratio is at or above 1.0.