Tuesday, June 24, 2008

SPY Put Volume Study

For those who were underwhelmed by yesterday’s monthly charts of the call volume and put to call ratios for the VIX, I am going to try to whelm you a little more by switching over to weekly charts of SPY (the ETF for the S&P 500 index) puts.

The logic here is that those who may not want to be short the market (or hedge long positions) with the additional leverage of VIX calls may prefer the increased liquidity, dollar strike price increments, and penny pricing benefits of SPY puts.

Looking at the chart below, the SPY put volume correlates nicely with intermediate bottoms in the SPX/SPY. Note the current spike in put volume. It is something to think about, anyway, as you contemplate what the Fed could possibly say that might put a stop to the slide in the equities market.

13 comments:

Anonymous said...

the chart is cut off and this ones not on stock charts. So whats the point we can't see it is it high or low bullish or bearish / Thanks

Bill Luby said...

I'm afraid my graphics are not compatible with all monitors. Sorry for the inconvenience.

The easiest workaround is to right click on the image, highlight "Copy Image Location," and paste the link into a new browser window.

I hope this helps.

Cheers,

-Bill

Bill Luby said...

I just noticed that Brett Steenbarger has covered similar ground with the SPY and put volume over the weekend in A Look at Bearish Stock Market Sentiment.

Frankly, I'm not sure how I missed this one, as Brett's blog is one of my favorites and should be on everyone's required reading list. For the record, it looks like we reached similar conclusions with similar data and a slightly different approach.

Anonymous said...

AWESOME blog! I just started reading some of your entries from last year. They are great! Thanks!

Bill Luby said...

Hi anon,

Thanks for the kudos. Just FYI, there is a section in the right hand column of the blog called Archive Highlights, where I have collected links to The Most Read Posts of 2007, as well as some of my personal favorites, all of which are also from last year.

I was going to wait until the end of the year to add a "Most Read Posts of 2008," but maybe this is an excuse to put an interim link for the first half of the year.

Cheers and thanks again,

-Bill

Anonymous said...

hi Bill,

pretty cool. How does it compare with the bear market conditions we have from 2000-2002? well, i means from 2006, we are still pretty much in a bull conditions

Bill Luby said...

Hi Anon,

I do not have the put volume data going back before 2003, but I will be sure to dig it up and extend the analysis back in time.

Regarding 2000-03, my hypothesis is that relative put volume levels (short-term moving averages vs. LT MAs) will show a similar trend in bear markets, even if the absolute volumes are on a different scale...but this is certainly something I would like to test.

Cheers,

-Bill

Matt said...

Hey Bill, where do you pull the SPY call/put weekly volume data from?

Bill Luby said...

Hi Matt,

I get the data directly from the Options Clearing Corp (OCC), but I'm sure there are a number of other sources.

Cheers,

-Bill

stan said...

Please, please, please. How about printing a scale for the weekly put volume on your chart. It would be so helpful for easy comparison and observing the current data. Thank you!!! Stan

Bill Luby said...

Stan,

That would be the blue numbers on the far right hand side of the graphic.

Cheers,

-Bill

stan said...

Bill,
Sorry, had to open graph in separate window to see volume scale. My mistake. Regarding this week (end July 3) volume. I have approx 1.221 million (406,337,201,277 thousand put volume for the 4 days). Is this compatible with your data or am I in error?

Bill Luby said...

Hi Stan,

For the four day week of 6/30 through 7/3, I have total SPY put volume of: 7,783,752.

If you want to build on the same data set/source I was using, try this link.

Cheers,

-Bill

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