Monday, March 3, 2008

Put to Call Data at Extreme Levels

Earlier this morning, I mentioned that the ISEE is setting new records on a daily for the all-time lowest readings in the 20, 50 and 100 simple moving averages and pointed out that the CBOE Equity Put to Call numbers have spiked to record levels as well. I thought a graphic might do a better job of telling the story, so I have attached a weekly chart of the CBOE Equity Put to Call Ratio below.

The chart goes back to the point at which the CBOE started publishing equity only put to call data and uses a 10 week EMA as a smoothing function. As the chart shows, the current EMA of 82 is a new record, eclipsing the old record of August 2004. In retrospect, 2004 was a great buying opportunity for those who had the fortitude to go against the crowd. As for the present, while the jury is still out, the odds are that the current situation is also a good buying opportunity, as difficult as it may be for some to pull the trigger.

[source: StockCharts]


Anonymous said...


Can't see the right side of this chart, I only see until Sep 2007. Is it just me? Is there a way to zoom?


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.



Alex said...

I agree with your post, but I'm not seeing other indications of a bottom, such as VIX spikes, QID volume spikes, or through some market breadth indicators I follow (% stocks with RSI below 30, % stocks below some moving average, etc). Maybe we're getting close?

Anonymous said...

Dear Bill,

Your site is great ...however the graphs are very difficult to read has nothing to do with monitor resolution ...I have hi res laptop screen and the images are barely readable ...why dont you link to the actual chart you generated at or if you can't provide that link for whatever reason ...then just link your website image to a larger image size? It will sure help your audience. Thanks!

Bill Luby said...

Hi Alex,

I agree that the put to call data have been generating the most extreme readings. I like the indicators you mention and thought that today might be more telling. In my book, I put today down as a victory for the bears, albeit not a decisive one.


I started off this blog by providing direct links, but I prefer -- entirely for selfish reasons -- to have the embedded graph. For awhile I did both, but eventually I got lazy and dropped the links.

The problem with the originals is that these are dynamic and thus not suitable for archival purposes.

I have gone back and forth on various aspects of the blog format, including space available for charts (which is a lot larger than most, FWIW) and will not likely be making any changes. That being said, I *do* appreciate the input and I'm glad that you enjoy the blog.

I will certainly keep an open mind about future modifications and improvements.



sysin3 said...

re: your post:

"either the market is extremely oversold and anxious investors are going to create a massive wall of worry for a nice rebound…or we are in the midst of a financial meltdown not seen in the lifetime of most investors. "

fwiw (not much maybe) ... I'm going to go with door #2

credit boom --> (you are here) --> credit bust

I just don't see any way out of this mess.

F-Trader said...

I'm with you on the upside buddy. Should retest January highs in the intermediate term.

Anonymous said...

Yes, but if you look at the data, at least from some of the things i see, even more recently, the put/call ratio has been somewhat correct. I also think it will be kind of difficult to pull up the equity market after looking at what is happening in the credit markets... someone is going to make and loose lots of money very soon. Whose side are you on? :-)

Ben Bittrolff said...

Wouldn't you be loading up on puts of you saw this?

Really Scary Fed Charts: March

Bill Luby said...

Good stuff, as always, Ben -- but I'm not ready to hit the panic button.

I have some protective puts, but my bias is bullish (I'm even long XLF) -- irrespective of today's slow leak to the downside.



RE said...

Great Work. Thx.

A question -- Where does one find a directory to find the symbols
($cpce) for data like this?
I have been looking for years and have only found the equities and a limited list of indicator symbols - which did not include this one.

Bill Luby said...

Hi Rick, has a directory (with a search function) of all the tickers and securities they support in their Symbol Catalog

Since it is not easy to find, I recommend bookmarking it.

As I'm sure you know, each broker, chart provider, etc. uses a slightly different ticker set, so there are no guarantees that the tickers will work with any other provider.



Unknown said...

As I've mentioned on your blog before, I'm not a big fan of putting too much weight into the put-call ratio as a market indicator... too much noise in the data imho, becuz one doesn't know whether the retail side is buying or selling premium, nor whether the transactions are in isolation or to hedge a larger position.

....except at extreme levels and volumes. :)

While VIX surfing last night, I came across this link wherein the writer seems to say his data shows that the VIX and VXN lag behind put/call ratio spikes. This doesn't make sense to me, since increasing put volume tends to increase volatilities (more demand to buy puts tends to make them more expensive), but I confess I haven't studied the data yet myself.

Thank you for the link to the symbol table, they should be very helpful! (wish they'd track the ISEE though)


Bill Luby said...

Thanks for reminding me of this link (which is actually on the upper right hand corner of the blog) and the observations made about put/call ratios and volatility.

I see what he is talking about in the charts he presents, but I have not been able to come up a "unified lead-lag option indicator theory."

Maybe I will add this to my research backlog.

Cheers and thanks for all the comments, here and elsewhere,


Anonymous said...

12/15/09-just read this blog entry and then checked the market action since March.

Nice one Bill Luby !!!!

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