What Do the People Want? Bearish Put Options.
Sentiment isn't quite giddy, but people are still buying protective put options.
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Let’s start today with sentiment because it’s definitely not too complacent anymore, although I am not quite sure what to call it.
Recall, just over a week ago, I showed you the Investors' Intelligence bull/bear ratio, and it had tagged just over 4.0, which I said I think was ‘giddy’. This week’s reading backed off some, but unless you call 3.9 significant, that’s all we got.
I realize it takes quite a bit to move these folks, so we’ll get to see what the AAII Day Traders have done Thursday morning. But it’s the options ratios that I want to focus on today.
Tuesday’s equity put/call ratio zipped right up to .78. That’s the highest reading since mid-January, when it got to .77. Basically, what this means is folks were more interested in buying puts on Tuesday in individual stocks than calls.
I don’t tend to put a lot of emphasis on a one-day reading, so take a look at the ten-day moving average of the total put/call ratio. You might need to squint, but this is unusual for it to rise like this while the S&P is rising as well. Yet that’s what we have.
The ten-day moving average is at .90. Since the calendar turned to 2026, the peaks in the moving average have coincided with a push down in the market, and the lows have coincided with lows in the S&P.
Now let’s talk about the ISE Equity call/put ratio. It has now been under 2.0 for seven straight days. It didn’t even do that in November. It didn’t do so in July. The last time it had such a long string of readings under 2.0 was March/April, when it went just over twenty straight days.
I can only speculate that it’s along the same lines as what we discussed yesterday when it comes to the charts of Robinhood and Shopify. They may not be software, but their charts are similar, and to me, that means the same folks who trade software trade these stocks. They trade as a group.
So if the group you trade heavily is not working on the upside, you will not favor calls, right? Think of all those tech stocks that have 2- and 3-times single-name options. How many folks do you think are trading Exxon options like they traded Microsoft? Probably not many. Heck, Exxon probably doesn’t even have its own 2- and 3-times options. Not yet, at least!
The same way we had two different (either/or) markets for so long, where tech was all that mattered on the upside and everything else languished, we now have the others rocking, and tech not doing great. So the options players seem to have checked out from the speculative nature they were so involved with for so long, or maybe it’s just because the S&P hasn’t had a big move in four months. Whatever it is, the options players are not terribly bullish now.
