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Market Sentiment: Options Activity for March 31, 2010

MarketSentiment

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: 0.80
  • Index Volume Put/Call Ratio: 1.74
  • Equity Volume Put/Call Ratio: 0.45 (Overly Bullish)

Equities with the highest volume put/call ratio (Overly Bearish Sentiment)

  1. Healthspring, Inc. Healthspring (HS) – Volume Put/Call Ratio: 98.27 – Open Interest Put/Call Ratio: 0.62
  2. Citrix Systems, Inc. (CTXS) – Volume Put/Call Ratio: 90.29 – Open Interest Put/Call Ratio: 1.5
  3. Patterson-UTI Energy, Inc. (PTEN) – Volume Put/Call Ratio: 25.75 – Open Interest Put/Call Ratio: 0.42
  4. National Penn Bancshares, Inc. (NPBC) – Volume Put/Call Ratio: 20.21 – Open Interest Put/Call Ratio: 1.61
  5. Ceradyne, Inc. (CRDN) – Volume Put/Call Ratio: 14.03 – Open Interest Put/Call Ratio: 2.97
  6. M&T BANK CORP (MTB) – Volume Put/Call Ratio: 13.93 – Open Interest Put/Call Ratio: 1.11
  7. ValueClick, Inc. (VCLK) – Volume Put/Call Ratio: 11.1 – Open Interest Put/Call Ratio: 0.97
  8. HSN, Inc. (HSNI) – Volume Put/Call Ratio: 8.83 – Open Interest Put/Call Ratio: 0.59
  9. Watsco, Inc. Common Stock (WSO) – Volume Put/Call Ratio: 5.82 – Open Interest Put/Call Ratio: 4.73
  10. A. Schulman, Inc. (SHLM) – Volume Put/Call Ratio: 5.38 – Open Interest Put/Call Ratio: 3.69

Equities with the lowest volume put/call ratio (Overly Bullish Sentiment)

  1. RAYTHEON CO (NEW) (RTN) – Volume Put/Call Ratio: 0 – Open Interest Put/Call Ratio: 0.12
  2. BOSTON PPTYS INC (BXP) – Volume Put/Call Ratio: 0 – Open Interest Put/Call Ratio: 2.18
  3. EDISON INTL (EIX) – Volume Put/Call Ratio: 0 – Open Interest Put/Call Ratio: 2.54
  4. Entertainment Properties Trust (EPR) – Volume Put/Call Ratio: 0 – Open Interest Put/Call Ratio: 3
  5. National Fuel Gas Company Commo (NFG) – Volume Put/Call Ratio: 0 – Open Interest Put/Call Ratio: 0.14
  6. Cimarex Energy Co Common Stock (XEC) – Volume Put/Call Ratio: 0 – Open Interest Put/Call Ratio: 0.23
  7. DOW CHEMICAL (DOW) – Volume Put/Call Ratio: 0.01 – Open Interest Put/Call Ratio: 0.49
  8. AVALONBAY CMTYS (AVB) – Volume Put/Call Ratio: 0.01 – Open Interest Put/Call Ratio: 7.03
  9. KRAFT FOODS INC (KFT) – Volume Put/Call Ratio: 0.01 – Open Interest Put/Call Ratio: 1.05
  10. AMER EXPRESS INC (AXP) – Volume Put/Call Ratio: 0.01 – Open Interest Put/Call Ratio: 1.56

**Note: Ratios indicated above use volumes and open interest of current month option contracts

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