Records are being shattered in key markets and one professional warned, “We’ve never seen anything like this before.”

More Record Speculation
January 22 (King World News) – Jason Goepfert at SentimenTrader:  Last week, options traders pressed their already record-high speculative activity even further. As a percentage of NYSE volume, call buying to open hit a record that had been set just the prior week. The number of contracts being open versus sold (potentially capping gains) is skyrocketing, and it’s not being offset by hedging activity.

Like last week, there is a danger of getting too caught up in one particular indicator showing a compelling extreme. While that’s hard to do right now given the sheer number of extremes to choose from, which has been the case for over a month, we’ve highlighted the options market at least once for the past few weeks.

It just keeps getting crazier…

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Perhaps the most telling measure of speculative excess is when options traders buy an extreme number of speculative call options. These are opening customer transactions on a leveraged, expiring contract that can only profit with one market direction, the very definition of speculation. And it just hit a record high for the 2nd week in a row.

Last week, customers bought 22.8 million call options to open, exceeding the record from the prior week of 21.6 million contracts. The only other week in the past 20 years that neared 20 million contracts was 19.8 million during the week of January 26, 2018.

As a percentage of total NYSE volume, speculative call buying reached 12.5% of NYSE volume last week, again exceeding the prior week’s level, which itself had been a record. At this point, it’s going parabolic.

Overall, options traders were not at all willing to cap their gains by selling call options to open. The number of call option contracts bought to open minus sold to open has skyrocketed over the past two weeks. We’ve never seen anything like this before.

And while that could be tempered if there was also a big focus on some protective strategies like buying puts, that’s not the case, either. The Options Speculation Index continues to climb to thresholds not seen since the peak of the 2000 bubble.

Among everything we follow, this kind of behavior is by far the most troublesome and should be a major worry for anyone buying with a medium-term time frame. This is just one example of why Jason Goepfert is the best in the world at what he does — providing actionable market data. To subscribe to SentimenTrader CLICK HERE.

Gold & Silver
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