HPI (Function)

$image\trumpet2.gif$ Disclaimer

The HPI series function returns the Herrick Payoff Index that is used to analyze futures and options. It is a measure of the money flow in and out of the market to which it is applied.

Syntax

HPI(OneCent, SmFactor)

Returns (Double)

A numeric value containing HPI for the current bar.

Parameters

Name	Type	Description
OneCent	Numeric	Sets the contract value of a 1 cent move in the underlying asset.
SmFactor	Numeric	Sets a user-defined smoothing constant, typically a decimal value between 0 and 1.

Remarks

Open Interest is a requirement in the Herrick Payoff Index, therefore, this study is only applicable to daily data for futures data. The formula applied is as follows:

$image\hpi_formula.gif$

. . .where

Ky = Yesterday’s HPI

S = User-entered smoothing factor

C = the value of a 1 cent move

V = Volume

I = The absolute value of today’s open interest or yesterday’s open interest, which ever is greater.

G = the greater of today’s or yesterday’s open interest.

M = High minus Low and the difference is divided by two.

My = Yesterday’s High minus yesterday’s Low and the difference is divided by two.

The formula has a minus sign below a plus sign. If M > My the plus sign is used, however, if M < My the minus sign is used.

When the Herrick Payoff Index function is called by any analysis technique, it will require two parameters from the user. The first parameter, OneCent is the value of a 1 cent move, the letter C in the equation. This value will depend on the security that is loaded. For example, if the security being loaded was cattle this value would be $400. If the security being loaded was soybeans this value would be $50.

The second parameter, SmFactor, is the user entered smoothing factor, the letter S in the equation. The SmFactor more or less corresponds to a moving-average time span. Higher values used for the smoothing factor tend to give more reliable results.

Example

Plot1(HPI(.25, .133));