Bets that the S&P 500 will rise still further have gotten so intense that one has to pay a huge premium for CALL options.
Bloomberg reports Traders Pay Through the Nose to Bet the S&P 500 Will Snap Higher.
As U.S. stocks trade at all-time highs, the price tag on bearish options has dropped to a trough relative to bullish contracts. The spread between the price of one-month, 25-delta puts and calls for the S&P 500 is roughly two standard deviations below its five-year mean, data compiled by Bloomberg show. It’s an indication of the greed — or lack of fear — in the market suppressing the CBOE’s volatility gauge.
The persistent decline in put prices — paying less for downside protection — drove the downtrend in the measure known as skew during most of last year’s second half. Since Jan. 3, investors chasing upside have led to an increase in the cost of calls, contributing to the historically significant level of bullish positions, the data show.
More than 5.4 million S&P 500 calls have already changed hands in 2018, the most on record to kick off the new year.
Buy PUTS Now
ZeroHedge reports “Buy Puts Now”: Morgan Stanley Issues A Warning As S&P Calls Hit All-Time Highs.
