Look at the insane levels of speculation far in excess of what was seen during the dot-com bubble.
CAUTION: Public Buying Of Speculative Call Options Ramps Up Again
November 1 (King World News) – Jason Goepfert at SentimenTrader: In January, traders reached a peak in speculation in the options market, unlike markets had ever witnessed before.
They’re back for more…
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Last week, the smallest traders spent 51% of their volume on buying call options to open. The largest traders tend to be more conservative, but even they focused 43% of their volume on call buying. Both are in the top 2% of all weeks since the year 2000.
NET SPECULATIVE VOLUME NEARS RECORDS
If we look at all trader sizes, in all options and ETFs traded in the U.S., net speculative volume (call buying to open minus put buying to open) accounted for more than 14% of NYSE volume. This is not accounting for the fact that options control the right to 100 shares; it’s just raw volume.
To see what a historical anomaly the past year has been, here’s the entire history.
INSANE LEVELS OF SPECULATION FAR IN EXCESS
OF WHAT WAS SEEN DURING DOT-COM BUBBLE:
Call vs Put Buying As % Of NYSE Volume
At Levels Never Seen In History!
When we look at the premiums spent on these options, it gets even more extreme. This is real money being spent. While it accounts for a tiny fraction of the value of U.S. stocks, the knock-on effects from dealer hedging can magnify its influence.
The historical chart shows just how much that last week stands out.
When speculative options volume spiked last fall, stocks pulled back for a few weeks. When it happened again in late January – early February of this year, the major indexes didn’t suffer too much, but meme stocks tumbled, small-cap stocks went into a coma, and breadth flattened. If we’ve learned anything from the past 11 months, it’s that there are factors that can easily overwhelm sentiment extremes to an extent we haven’t seen in over 20 years, if ever. But risk just ticked higher for some higher-risk parts of the stock market…This is another example of why Jason Goepfert is the best in the world at what he does – providing actionable market data. To subscribe to the internationally acclaimed work Goepfert produces at SentimenTrader CLICK HERE.
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