Market Sentiment: Options Activity for March 22, 2010
A reasonable gauge of market sentiment is the Put/Call Ratio. This is the ratio of the volume of put options to the volume of call options. Alternatively, open interest can be used in the calculation, as opposed to volume.
The ratio has become a commonly used indicator to determine if investors are bearish or bullish on a particular investment. When the Put/Call ratio is greater than 1 it is indicative of a bearish sentiment with Puts exceeding Calls. Conversely, a ratio less than 1 would mark a bullish sentiment with Calls exceeding Puts.
Contrarians use this ratio as a market timing indicator by gauging investments that may be overly bearish (high ratio) as a sign that the market is close to bottoming and buy on the expectation of a rebound. Conversely, if the market has become overly bullish (low ratio) investors would interpret this as an indication that a top is near and sell as a result. The ratio is more indicative when greater than 1, bearish sentiment, as it is more common that investors purchase call options over puts.
Today’s Options Action at mid-day:
- Total Volume Put/Call Ratio: 0.90
- Index Volume Put/Call Ratio: 1.89
- Equity Volume Put/Call Ratio: 0.53
Equities with the highest volume put/call ratio (Overly Bearish Sentiment)
- Tractor Supply Company (TSCO) – Volume Put/Call Ratio: 57.72 – Open Interest Put/Call Ratio: 2.85
- Global Payments Inc. Common Sto (GPN) – Volume Put/Call Ratio: 45.45 – Open Interest Put/Call Ratio: 0.55
- NOBLE ENERGY INC (NBL) – Volume Put/Call Ratio: 38.58 – Open Interest Put/Call Ratio: 2.06
- Google Inc. (GOOG) – Volume Put/Call Ratio: 31.38 – Open Interest Put/Call Ratio: 6.94
- Officemax Incorporated (OMX) – Volume Put/Call Ratio: 21.56 – Open Interest Put/Call Ratio: 2.59
- GOLDMAN SACHS GRP (GS) – Volume Put/Call Ratio: 19.37 – Open Interest Put/Call Ratio: 4.82
- ECOLAB INC (ECL) – Volume Put/Call Ratio: 17.28 – Open Interest Put/Call Ratio: 0.76
- Apple Inc. (AAPL) – Volume Put/Call Ratio: 17.2 – Open Interest Put/Call Ratio: 3.58
- Panera Bread Company (PNRA) – Volume Put/Call Ratio: 16.87 – Open Interest Put/Call Ratio: 1.26
- Teleflex Incorporated Common St (TFX) – Volume Put/Call Ratio: 16.45 – Open Interest Put/Call Ratio: 0.44
Equities with the lowest volume put/call ratio (Overly Bullish Sentiment)
- NCR Corporation Common Stock (NCR) – Volume Put/Call Ratio: 0.02 – Open Interest Put/Call Ratio: 0.21
- Bed Bath & Beyond Inc. (BBBY) – Volume Put/Call Ratio: 0.02 – Open Interest Put/Call Ratio: 0.73
- Pennsylvania Real Estate Invest (PEI) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 2.7
- LSI CORPORATION (LSI) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 0.12
- ValueClick, Inc. (VCLK) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 1.57
- M B I A INC (MBI) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 0.3
- Synovus Financial Corporation C (SNV) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 0.29
- Arthur J. Gallagher & Co. Commo (AJG) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 0.12
- Martin Marietta Materials, Inc. (MLM) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 1.71
- Boyd Gaming Corporation Common (BYD) – Volume Put/Call Ratio: 0.03 – Open Interest Put/Call Ratio: 0.39
**Note: Ratios indicated above use volumes and open interest of current month option contracts
Stocks mentioned in this post: GPN, NBL, TSCO
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