I’ve been sounding off a cautionary note as action in the equities market appears top heavy. But today it became obvious that the option traders are starting to really push their luck:
Although it is just one data point, having so much call buying that it pushes the ratio to double the number of calls to puts is rare. The last time the CBOE put call ratio was trading at 0.50 or lower was in December 2007 when the S&P 500 was at ~1500. You can see a more long term chart of the put call ratio in the above link.
And it isn’t just the option traders on the CBOE. The equity only ISEE sentiment index - which specifically measures retail option traders - came in at 203 today. That means 203 calls were bought to open a trade compared to 100 puts bought to open a trade. The last time this ratio was above 200 was December 30th, 2008 - just before the market took one too many sips of the bubbly and had the New Year’s tumble.
I’m a bit hesitant because there have been some data integrity issues with the ISE before. So to make 100% sure, I’ve contacted them to confirm the most recent number. If there is a change, I’ll write about it. Otherwise, the number stands.
If you’re new to this new method of looking at retail option traders, then this is a good introduction to the ISEE sentiment index.
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