Suddenly, everyone wants puts!

Gee, who would have thought?

Here’s the trusty 5-day trailing average equity put:call ratio as of Thursday’s close (for some reason, indexindicators doesn’t update this until the next morning). CPCE doesn’t give sell signals like last week very often, but when it does, SELL!  BTW, Friday’s closing CPCE print was 1.05, so this thing has really rocketed up now.

Source: indexindicators.com

This translates into some serious price changes, even on long-term options. The SPY 90-strike December 2011 puts I favor are up 40% in just a few days. I’ve also written a whole bunch of March-Sept 2010 calls on stuff like QQQQ and DIA. That’s a great way to make some income, since even if the market doesn’t crash, so long as it doesn’t keep blasting upwards the time decay is money in your pocket.

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UPDATE. Here’s the chart as of Friday’s close. I bet we don’t bounce hard until the 5-day average gets at least 1SD above the mean. And look at the swiftness of this week’s drop in SPX… this is a more powerful decline than any since last winter.

Insurance is still on deep discount

Here’s the latest shot of the 5-day trailing average put:call (from indexindicators.com):

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This kind of complacency is extremely rare and pretty much dooms the stock market from making any more headway without a correction.

Nobody wants insurance

Put options are out of fashion, as shown by the 5-day average equity put:call ratio, which is again one standard deviation below its mean. Except for two brief touches, it has now been well under the mean for six months. Since this is a mean-reverting statistic, it is overdue for an excursion into the upper end of the range:

Source: indexindicators.com

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SKF halted. So much for inverse ETFs.

I knew these products were too good to be true. I don’t know why some short ETFs have been halted today (ProShares is mum), whether it is just overwhelming volume or that their shorting strategy has been impaired by the ban, but in addition to counterparty risk, this is just one more example of how options are superior.

Today is also a stress-test for brokerages. If yours is under performing today, better look for a more robust alternative, because this is only the beginning.