Info!! Standard Stock Marketplace Sentiment: The Equity Put-Call Ratio

The nigh recent posts convey focused on several of import dimensions of short-term stock marketplace position behavior:  Buying in addition to Selling Pressure; Volatility; in addition to Breadth.  Above nosotros come across even in addition to thus about other telephone commutation dimension:  sentiment.  My favorite mensurate of regard is the put-call ratio specific to private stocks trading listed options.  I convey flora this mensurate to live on significantly amend at predicting short-term cost crusade inward SPX than the put-call ratio for index options.  

As y'all tin strength out come across from the nautical chart above, roofing 2014 to date, spikes inward the equity put-call ratio convey been associated amongst skilful buying opportunities inward stocks.  (Data from e-Signal in addition to analyzed/charted inward Excel).  Forward returns convey been restrained next periods of depression put-call ratios.  If nosotros larn dorsum to 2007, when the equity put-call ratio has been inward the lowest one-half of its distribution, the side yesteryear side x days inward SPX convey been unchanged.  When the equity put-call ratio has been inward the highest one-half of its distribution, the side yesteryear side x days inward SPX convey averaged a arrive at of +.49%.

It's a neat instance of how next the herd produces suboptimal marketplace position results.  It's when stocks are nigh unloved that they've produced the best returns.  

Further Reading:  The Relative Put-Call Ratio
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