ISEE Sentiment Indicator

What Is ISEE Sentiment Indicator?

The ISEE sentiment indicator (or sentiment index) measure of investor sentiment in the market, measured by taking a gander at the number of opening long call options to opening long put options purchased on the International Stock Exchange (ISE), an electronic derivatives exchange.

Figuring out ISEE Sentiment Indicator

ISEE sentiment indicator just considers the purchases made by retail customers and does exclude the purchases made by market makers or institutional clients, as customers are believed to be the best measures of sentiment.

It is calculated as follows:
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Assuming the value of the indicator is greater than 100, it means that all the more long call options have been purchased by investors than long put options. Assuming the indicator is below 100, it means that all the more long puts have been purchased compared to long calls. The higher the index is over 100, the more bullish the market sentiment is believed to be, with measures below 100 signaling bearish sentiment.

The ISE Sentiment Index (ISEE) brands itself as a unique measure of market sentiment utilizing put/call value that main purposes opening long customer transactions. Opening long transactions made by customers are remembered to best address market sentiment since investors frequently buy call and put options to express their genuine market perspective on a specific stock - they normally buy calls when they anticipate that the market should go up, and puts to safeguard themselves when markets go down.

Market maker and firm (institutional) trades are excluded from the index's calculation since they are not remembered to be representative of true market sentiment due to their specialized nature. Along these lines, the ISEE calculation method is promoted as a more accurate measure of true investor sentiment than traditional put-call ratios.

Special Considerations

The traditional put-call ratio is an indicator that gives data about the trading volume of all put options to call options on a given security. The put-call ratio has long been seen as an indicator of investor sentiment in the markets. Technical traders utilize the put-call ratio as an indicator of performance and as a barometer of the overall market sentiment.

The ISEE's inadequacy, in spite of its unmistakable methodology, is that it just tracks transactions carried out by customers on its own platform - the ISE Exchange. As per the Options Clearing Corporation (OCC), the ISE contributes around 7% of all exchange traded options volume in the United States, and a large extent of that is made out of market maker or institutional orders. In any case, the ISEE can be utilized related to the traditional put-call ratio to pursue more educated trading choices.

Features

• The ISEE sentiment indicator thinks about the ratio of opening long call options to opening long put options to measure market sentiment.
• ISEE sentiment indicator just considers the purchases made by retail customers and does exclude the purchases made by market makers or institutional clients.
• The ISEE's inadequacy, notwithstanding its unmistakable methodology, is that it just tracks transactions carried out by customers on its own platform - the ISE Exchange.