"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
-
Sun Tzu

Friday, February 1, 2013

Interesting: Index and Option Ratio Rising

Investors tend to trade more put options when the market declines: there is usually a strong inverse correlation between S&P 500 and the Equity Put/Call Ratio.


Recently, however, both were moving higher, which is an unusual pattern. Investors are obviously still cautious and are not trusting the rally; a bullish sign. Price often turns when they become too optimistic and the p/c ratio records at low levels: