Yesterday, astute market observer and Options Institute Instructor Kevin Davitt pointed out that the SPX Put Call Ratio had closed under 1.00 three days this month (Dec 7th, Dec 8th, and Dec 13th).  I knew this was a rarity, but didn’t realized how rare it was for this ratio to close below 1.00.  In fact, it has only happened sixteen times since July 2010 (which is how far back the data goes back on CBOE’s website).  Five of those sixteen occurrences happened in 2016 – twice in July and the recent three occurrences.

Before moving forward, a quick explanation about the SPX Put Call ratio.  This figure is determined by dividing the number of SPX put options divided by the SPX call option volume in a single day.  Because SPX options are a preferred method of hedging by institutions we almost always see more Put volume than Call volume each day in that arena.  In fact, an average about 1.6 puts trade for each SPX call each day.  The chart below shows the put call ratio for 2016.


So, I got to playing with numbers which in this case meant taking a look at what the S&P 500 did after the put call ratio anomaly.    I ran some quick numbers and looked at what the S&P 500 did over the following 5, 10, and 20-day period following a day where more calls than puts traded.  The table of those results appears below along with the average 5, 10, and 20-day S&P 500 performance since July 2010.


The results are mixed at best.  More call volume could be taken in many ways (speculators getting long, hedgers not as concerned about the markets, etc) but as a predictor when the SPX call option volume is greater than the SPX put option volume the subsequent market activity hasn’t been decidedly bullish or bearish.

CBOE has a micro site showing all the put call ratios along with data for you to play with as well.  Click here to visit that part of our website.