Friday, June 17, 2011

Market comments for June 17th: Put to Call ratio analysis

Something a little different today for my most faithful readers, I have some charts you will only find here. I have recently been comparing the period of June 2008 to June 2011 because we have recently logged in 12 days now of the Put to Call ratio exceeding a 1.00 reading. I thought today a bit more refinement was in order to see what can be learned from a more in depth analysis.

To start with let me explain some of the data. There are Options of Puts and Calls taken out on stocks (Equities) and on the Indexes, like the Dow or S&P500. When I have reported to you that the Put to Call ratio has exceeded 1.00 for 12 consecutive days, I have included all of these Options in a Total reading. Today I am going to break down Equities from Indexes and am going to look at 2 periods, all of June of 2008 vs. June 2011 to the close yesterday.

Below are 4 charts. 2 of the charts are of the Equity volumes for 2008 and 2011 and 2 are for the Index volumes for 2008 and 2011. As you can see from all 4 charts that only one chart seems to have a real trend and that one is for Index Puts and Calls, (that is the first chart) and that the volume not only is trending but also that it exceeds all other Options Volumes for both periods.

To me this means that the biggest bets being made right now are being made for an overall market drop, hence the Index Put options rising to significantly higher volumes in 2011 than in 2008, before the major market correction down to 6,500 on the Dow. It seems to me that this time people are putting their money where their mouth is. Traders see that it isn't specific stocks which will tend to be hit in a correction, but rather the entire market. That is something to take note of.

UPDATE: 7:52am PST

Also of significant note today is that Options expire for the month of June and for the Quarter. Expiring equity, P.M. settled index options and treasury/interest rate option classes cease trading. Expiring cash-settled currency options cease trading at 12:00 p.m. EST. This is why the Volume is already over 148 Million shares in just a little over an hour this morning.

The Michigan Sentiment Index came in below expectations this morning for June. A reading of 71.8 is below expectations, which was 73.5 and below last month's 74.3 reading.

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