Put Buying

We are seeing put buying today despite a strong move higher. That is a positive for the market.

11 comments:

CP said...

Put buying on the CBOE isn't that high - just not at all time low levels like two weeks ago.

Tsachy Mishal said...

Over 1 is high. Especially on an up day.

Tsachy Mishal said...

I think that what is going on is crazy but Im just calling it like I see it.

CP said...

Ah, I pay attention to just the equity P/C ratio. We are seeing more put buying now than this morning though.

Interpreting EuroTARP as bullish is really stupid - and how it has any meaning for US equities is beyond me.

Tsachy Mishal said...

For the most past the equity and total move together. The one time they didnt was in April. It wasnt until the total came down that the market topped out.

Tsachy Mishal said...

But then again we saw all sorts of once in a decade sentiment extremes during April so maybe its not a good example.

PJ said...

It's only rational to buy puts with the market within 6% or so of its post-recession highs, solvency issues worse than March 2009, the double-dip recession about to start, and, in the last week, the global Keynesian wizards revealed to have no magic, and the emperor no clothes.

It will take more than a few days of heavy put buying to persuade me that people have positioned themselves too far on the short side.

CP said...

Well, I'm stocking up on puts today, and I'm the smart money!

PJ said...

Tsachy - For it to be a positive for the market, shouldn't the market be moving up while the put buying is occurring?

Today, we had the market move up overnight, and put buying commenced in the morning. Since then the market is down almost a percent.

Tsachy Mishal said...

In a vacuum this is a positive. What makes it positive is that the market is hanging in and it comes after a string of days of put buying.

That said, we are in unprecedented times so I would put less weight on this but not ignore it. And remember, its only a single indicator.

Tsachy Mishal said...

In hindsight this was the clue that the market was not going to fade today.