Pessimism Rising - Options Markets Signal Bears Beating Bulls

Amid the tightest range in stock market history, bearish sentiment toward stocks is rapidly worsening according to the options market. As Bloomberg reports, based on the number of puts trading compared with calls on single stocks, pessimism is higher now than any time since 2012 as "upside speculation has really fallen off a cliff." Contrarians may be rejoicing but without a QE-backing and central bank omnipotence in question, as one strategist noted, "perhaps these traders fear a greater correction coming down the pike."

With about half of the S&P 500’s members trading at least 10% below their 52-week highs, investor skepticism is growing, as Bloomberg reports,

About 0.75 bearish options have changed hands for every bullish one on average in the last 10 trading days, according to a CBOE index tracking daily volume through Aug. 18. The ratio reached 0.76 last week, its highest reading since June 2012.

Equity trading this month has been dominated by signs that China’s economic slowdown is deepening, which culminated in a surprise devaluation of the yuan last week. In addition, investors are anticipating the Fed will move toward higher rates this year, with futures markets predicting a 36 percent chance that will happen at next month’s meeting.

While the broader stock market has held up, hovering 2.4 percent from a record high, signs of trader anxiety are seeping in.

...

Traders are spending the most on puts since October, according to Sundial Capital Research Inc.’s Jason Goepfert. Then, the S&P 500 plunged 9.8 percent, spurring a rush for protection as the broader market came the closest to entering correction territory since 2011.

“In the past two years, the only time we’ve seen more put buying among these traders was mid-October,” Goepfert wrote in an August 17 note. “Perhaps these traders fear a greater correction coming down the pike.”

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Is consensus the new contrarian? Or has the options market become 'different' this time?

Comments

[wildbad]

yep..puts are the new bullish

[buzzsaw99]

options traders ride the shortest bus of all

https://www.youtube.com/watch?v=IwwuZr6H1LQ

[KnuckleDragger-X]

Stock market algo's will be reset to piranha mode and start taking out the small trading houses next.......

[lehmen_sisters]

Sell puts , Buy calls , market still has a few days worth of steam in her....maybe. 

[KnuckleDragger-X]

Just noticed that the market fun has made it to Drudge, so things are going swimmingly.......

[EurGold]

Buy Gold, Silver, Platinum and Palladium Bullion Bars and Coins with Euro, Great British Pound, US Dollar, Bitcoin and multiple cryptocurrencies.

https://www.eurgold.eu/

[Pareto]

"perhaps these traders fear a greater correction coming down the pike."

.......or maybe....they're gonna JBTFDYSFI!

[Yen Cross]

  I'm laughing at the idiots on the blowhorn that said European stocks were a good buy after the Greeks capitulated.

  I hope those clowns are asses and elbows deep in margin calls.

 Same with the oil shills. ;-D

[dsty]

Pesseimism?

Well, not at ZH, that's for sure.

[Redart]

deez means the market will go up in October

[Salah]

world's bad guys starting now, before 2016...have figured out America's pissed---no more manginas!

Djibouti boots out US forces, turns port over to Chinese military

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150820000061&c...

last 16 months of Barak Mangina Obama's regime are going to be Hell! (even the 'cosmic cards' agree)

[Amy G. Dala]

So, who should we short today?  Bond insurers for Puerto Rico look pretty good . . .I don't think AMBAC or NATL can afford any payout at all.