QandAs: Finance

What is the Hines Ratio?

Answer:
The Hines ratio is a “sentiment ”

indicator, and assists traders in analyzing investor “emotion” in the bond market.

The Hines ratio assists traders in identification of buying and selling points. When there are high levels of option sentiment it can affect the Hines index. The Hines ratio presents the options volume as a ratio of open interest. When there is increased volume and increased open interest it’s an indicator that new positions are being created.

The formula for the Hines index is:

(Total put volume / Total put open interest)

(Total call volume / Total Call open interest)

When the index numbers reach greater than 1.8, a buy signal usually occurs. A signal of intermediate-term weakness is usually when measurements are below 0.65. Of course, the buy and sell signals don’t always work out at exactly these numbers. For predicting higher bond prices the buy signals are usually a much better indicator than sell signals.