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<\/figure>\n\n\nThe CBOE Put\/Call (CPC) ratio measures investor sentiment (a contrary indicator) by taking the total volume of put options traded on a given day and dividing it by the total number of call options.<\/p>\n
Whenever the ratio spikes above 1.20, it indicates traders are rushing to buy put options and make bearish bets \u2013 which is bullish from a contrarian standpoint. When the ratio drops below 0.80, traders are aggressively buying call options and betting on an upside move \u2013 which is ultimately bearish.<\/p>\n
For example, in mid-February, as the S&P was posting an all-time high above 6100, the CPC hit 0.70. The S&P 500 dropped 1100 points over the next six weeks.<\/p>\n
In mid-May, the last time we looked at the ratio<\/a>, the CPC was again showing option traders were enthusiastically betting on more upside to the stock market. The S&P 500 dropped 150 points over the next three days.<\/p>\n The CBOE Put\/Call ratio closed at 0.75 on Friday. Traders are aggressively buying call options as the stock market is trading at its highest level ever. Folks don\u2019t seem to be paying attention to \u201crisk\u201d anymore.<\/p>\n Their focus is on \u201creward.\u201d And, they\u2019re pressing their upside bets.<\/p>\n That is probably a mistake. It\u2019s rare for the stock market to sustain any sort of rally when the CPC is this low.<\/p>\n Yes\u2026 stocks could go higher. It is the stock market after all. Anything can happen. But, the CPC has an outstanding track record as a contrary indicator. And, traders ought to be looking over their shoulders right here.<\/p>\n The CPC indicator is suggesting there\u2019s at least a short-term decline in front of us \u2013 if not something even more severe.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark P.S.<\/strong>\u00a0This market environment is the perfect playing field for\u00a0my Bill Payer strategy<\/a>\u2026 Because even when the markets are chaotic and volatile, you can use what I believe is the single best income-producing strategy to make upwards of $400\u2026 in just one week.<\/p>\n And this isn\u2019t a cherry-picked result. I\u2019ll show you how to do it over and over again with one straightforward investment vehicle.<\/p>\n To check out how I put this strategy to the test by paying for an entire day\u2019s worth of purchases around Miami,\u00a0go\u00a0right here.<\/a><\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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Editor, Market Minute<\/em><\/p>\n