Over the past few days, there has been an interesting twist to options traders' behavior. Volume in equity options has heavily skewed toward calls; volume in index options has skewed toward puts.
The 3-day average of the CBOE Index Put/Call Ratio is in the top 95% of its range over the past year. The average of the Equity Put/Call Ratio is in the bottom 5% of its range. Going back more than 20 years, this has never happened at the same time.
When traders behaved this way, then there was a 29% chance of a larger-than-average rise in the S&P 500 at some point over the next month, and 0% chance of a larger-than-average drop. This should not be taken literally - of course, there's a chance of a large decline. The point is to show that historically, there has been a better probability of a big rise than a big decline over that time frame.
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We also looked at:
- All signals showing when traders were trading index puts but equity calls
- Also what happened when traders were focusing on calls in both types of options
- Oil rig counts are turning up - what that means for energy, oil & gas stocks, and crude oil
- Small business optimism has jumped - what that has meant for small-caps and the broader market
The post titled Traders are buying calls on stocks but puts on indexes was originally published as on SentimenTrader.com on 2020-10-15.
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