S&P 500 option traders still bullish

Posted Aug 28th 2009 2:45PM by John Jagerson
Filed under: Options, S and P 500

The S&P 500 may be down slightly this Friday afternoon after a fairly flat week, but that does not mean that all traders are bearish. In fact, option traders still appear to be quite bullish. Investors buying call options still outnumber put option buyers by more than 2 to 1 in the S&P 500 SPDRs ETF (SPY) for the September at-the-money strike price.

When a traders buys a call option they think the stock is going to go up, and when they buy puts they think the stock may go down. The ratio between calls and puts is often looked at as a reflection of underlying trader sentiment. Significant changes in this balance may indicate that sentiment is changing.

The current balance still has twice as many option traders making bullish bets on the S&P 500 SPDRs ETF (SPY) than bearish bets. This makes me wonder if traders are seeing the flat trading this week and the mild decline today as a nice new opportunity to enter the market.

I should note that stock option traders are naturally a little bullish. A slight bias towards call options over put options is normal but the very large ratio of 2:1 is encouraging as we head into the weekend and prepare for the labor reports due next week.

Tags: inthenews, options, S P, SP, SPY