A barometer that closely monitors options market activity suggests investors may be getting a little too comfortable with the stock’s upward trajectory.
According to Dow Jones Market Data, CBOE stock’s put-call ratio (which compares bearish put option trading activity to bullish call option trading activity associated with individual stocks) rose late last week. It fell to 0.44, the lowest level since July 11, 2023. The ratio rose slightly on Monday, but remained at a significantly lower level of 0.5.
Jonathan Baird, publisher of the Global Investment Letter, said that in the past, when this ratio fell below 0.5, it was usually followed by a continued decline in the stock market.
“Periods in which the put/call ratio declined below current levels preceded declines in the S&P 500. Conversely, elevated values of the put/call ratio (indicating investor bearishness) ,” he said in a shared commentary. On LinkedIn.
To be fair, other areas of the options market are less optimistic. The CBOE Volatility Index is driven by the movement of S&P 500 Index options and is still significantly up by more than 20, even though the S&P 500 Index hit another all-time high on Monday.
Ken Jimenez contributed reporting
