Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Equity Put/Call Ratio Reaching Extremes?


Why can't you just let a guy have a little fun?


Editor's Note: Minyanville is a community of people who share an interest in fiscal literacy. As perspective is an important aspect of our daily routine, we share this email with hopes that it adds balance to your process.

"Did you see that the equity put/call ratio (21-day average) is at one of its lowest levels in years? Only January 2004 was worse than now. Should be approaching a good time to bet on a decline here."

Minyan Juan


Yes, I see that, BUT there is one very important distinction, and that is the makeup of that ratio.

In January of this year, the CBOE finally re-classified QQQQ option volume as "index" volume instead of "equity" volume as they had been doing (despite the fact that they had considered SPY and DIA options as "index" volume all along - go figure). Due to the fact that QQQQ option volume is often significant, and is skewed heavily to the put side, it has had an effect on the equity put/call ratio.

If you try to compare the equity ratio now to where it was a year ago, you're not comparing apples to apples, more like apples to pears. The equity ratio will have a considerably lower trading range now than it did before - not because traders are more optimistic, but because of a simple change in the construction of the index.

I've kept a separate equity ratio for years that backs out QQQQ options, so we can accurately compare current readings to historical ones. And right now, the 21-day average of that data is on the lower end of its range, but nowhere near as extreme as it was in January 2004, or even January 2005 for that matter. I would classify it as perhaps mildly bearish for the market, but not enough reason to generate any aggressive positions

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos