Using Call Put Ratio Charts For Indexes And Components Quoted in Reuters Story

Discussion in 'Trading' started by Matt_ORATS, Jul 16, 2020.

  1. Matt_ORATS

    Matt_ORATS Sponsor

    The call put ratio can often reflect the bullish or bearish views of options traders, with more calls trading indicating bullish sentiment.

    The ratio should be used as a relative measurement to its normal level for symbols. For example, the SPX call volume lagged put volume over much of the time since 2007 averaging only 55% as shown below.

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    Whereas, the call/put ratio average for the S&P components, as represented by the symbol SPX_C in the ORATS Wheel Chart below, has averaged 150% since 2007.

    [​IMG]
    Recently, with the pouring in of retail traders into the market, many through the trading app Robinhood, calls are outstripping puts by 200% for the average component.

    [​IMG]
    Contrast this with the index SPX. Recently, the SPX call put ratio has been below its long term average until yesterday.

    [​IMG]
    Generally, the SPX represents institutional smart money and the components represent retail traders.

    Near the bottom of the Covid crash, the SPX call/put was above its normal 55% hitting 100% a few days after the bottom. The crash saw the S&P components call/put below its average, only rising to its long term average near the top of the shaped recovery.

    Matt Amberson was quoted in the Reuters pointing out this ratio. https://www.reuters.com/article/us-...ons-bets-on-surging-tech-giants-idUSKCN24F2LN

    More reading: https://blog.orats.com/put-call-skew-dips-in-coincidence-with-market-rallies
     
    guru likes this.
  2. Put-Call ratios reflect player sentiment. As a general rule... best to fade extremes at some point.