Investors React to S&P 500's Climb With Increased Bearish Bets
Investors are placing larger bets on the possibility of a stock market decline as the S&P 500 approaches a record high. On Wednesday, the equity put/call ratio surged to 1.55, reaching its highest level in over a year. This ratio reflects the buying of put options, indicating that more traders are hedging against a potential drop in share prices.
The increase in bearish bets coincides with the S&P 500's rise, coming within 0.3% of setting a new record close. The recent rally has been fueled by optimism around easing inflation and the potential for the Federal Reserve to reduce borrowing costs in the coming months.
However, the surge in put buying suggests that some traders have concerns about the impact of December's inflation data, set to be released on Thursday at 8:30 a.m. Eastern.
It is worth noting that spikes in put option buying are often seen as contrarian indicators, signaling that investors may be overly fearful. In fact, the total open positions in individual equity options still display a bullish bias, with approximately 190 million calls and 138 million puts at the close of Wednesday's trading.
Additionally, while the equity put/call ratio spiked, the ratio for the S&P 500 index dipped to 1.19, nearing the lower end of its recent range.
Investors will be closely monitoring the outcome of Thursday's inflation data release to gauge market sentiment and anticipate any potential impacts on stock prices.
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