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Speculative Bullish Option Activity Hits Decade High
Sentiment Trader demonstrates how bullish speculative mania as measured by option activity is now at a decade, if not all time, high. With moral hazard having become the only game in town, everyone believes their investments are implicitly guaranteed by the government, which if recent indications are to be believed, is on deck to repeat the collosal Cash For Clunkers blunder with appliances, and media companies soon thereafter. When the taxpayer picks up the tab, every tab, how can one lose? And in the new paradigm of capital markets, the crowd is always right.
From Sentiment Trader:
The chart below shows a Speculative Options Activity index. This is simply the number of opening options transactions that are bullish bets on the market minus those that are bearish on the market. To be more precise, call purchases and put sales are combined (since they both profit if the market rises), and then we subtract the total number of put purchases and call sales (since they both profit if the market falls).
Constructed this way, the indicator will show a high reading if options traders expect the market to rise, and a low reading if they expect it to fall. The chart below shows this measure over the past few years.
Here's a longer-term version of the same chart.
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because the madness of crowds never ends in tears.
the $24 trillion dollar question is who picks up the tab for taxpayers?
China, or more generally our national creditors?
What ever happened to that wonderful term “Irrational exuberance”?
how about typewriter manufacturers??
... until the crowd is wrong...
http://www.untitledarchive.com/post_images/5285_bufallo-jump.jpg
I just don't understand how the market stayed up as well as it did last week with all the call buying into expiration... I would have thought that they would have been punished going into expiration.
It was the people who were short calls OTM that went ITM that got punished, had to cover...
How do you spell relief?
M A N I P U L A T I O N
"...everyone believes their investments are implicitly guaranteed by the government..."........They are.
Great! Our insolvent gov't guarantees my investments...BUY BUY! BUY! BUY! hahaha
for every call sold there is a buyer and for every put sold there is a buyer
thus, how come this doesn't amount to 0?
Because this only counts opening options transactions?
I love it. Previous peak at November 2007! Look out below!
I read that Barney Fife is buying calls and going long equities.
Aunt Bea would be so proud.
Lol. I knew there had to be at least one spike today. Of course, the Nasdaq has been holding the line all day to prepare for the pop.
And look, the DXY went from 76.90 to 76.75 just like that. Nothing to see here, everyone.
the market seems convinced that in each scenario long risk positions should prevail, win-win... hmmm
So if I were the sysadmin for HAL-9000 I would configure it to be on the other side of all these options trades, take the market sideways with a slight uptrend through October, collect some premia and let the punters expire slightly in the money so HAL can deliver its way out of all those pumped, shitty positions it has been unavoidably accumulating since March (while loading up on out of the money November positions betting on downside).
Then, after Oct expiry I'd press some buttons, flip some levers and HAL's perma-bid would strangely vanish to be replaced by a perma-ask, no doubt comforting for all those punters who freshly acquired garbage stocks at only a very small profit.
All timed nicely to kill equities end Oct-Nov which, on behalf of my buddies in the Fedury, will remind everyone just how astoundingly important it is to have Count Fedula sucking I MEAN protecting us all, at a time when Stimulus 2.0 and ongoing QE are tough sells.
Has there been a discussion here how the Central Planning Committee may be running a parallel recovery scheme in the oil market using the strategic petroleum reserve as a perma-ask?
Options would be a good low-risk strategy, rather than holding underlying stocks.
If the doomsday scenarios preached on here don't come good, the market will continue rising. Stimulus 2.0 anyone?
The Doomsday scenarios preached anywhere won't come true. That window has come and gone. The time frame is up. Your equity investments have been quantitatively eased higher, and will continue to be.