According to ChainCatcher, US stocks kept climbing as Middle East tensions eased, oil prices weakened and corporate earnings stayed strong. The S&P 500 gained 5.8% in the four trading sessions before Aug. 4, and options markets sent out the strongest bullish signal in years. The one-month daily average ratio of S&P 500 call options to put options rose to 0.9, the highest reading in at least four years. Short-term call skew, a gauge of how much investors pay for upside exposure versus downside protection, touched a two-year high. Taken together, the data suggest investors are paying higher premiums to position for a fast advance, with fear of missing out building among some institutional investors. Some analysts say institutional investors now worry more about missing a rally than about a pullback. Still, others caution that extreme optimism in the options market can amplify short-term swings, and that a move driven by technical factors may lead to a misjudgment of risk.
US stocks extended their advance as tensions in the Middle East cooled, oil prices softened and corporate earnings held up. The S&P 500 rose 5.8% in the four trading sessions before Aug. 4, with the options market flashing its strongest bullish signal in years.
Call buying reaches a milestone
Data show the one-month daily average ratio of S&P 500 calls to puts hit 0.9, the highest reading in at least four years. Short-term call skew, which tracks how much investors are willing to pay for quick upside, touched a two-year high. Both point in the same direction: traders are paying richer premiums to position for an accelerating rally.
What traders are worried about
Analysts describe the mood as rising FOMO. Some institutional investors, they say, are now more concerned about being left behind than about a pullback.
There is also a note of caution. Other observers argue that one-sided bullish positioning in the options market can amplify short-term volatility. A rally driven by technical factors, they warn, could lead to risk being misread.
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