S&P 500 (SPY) Sentiment Check, Put/Call Activity, Volatility Index and Short Interest Charts

I want to analyze the option activity on the SPY (S&P 500 ETF). I found some interesting activity on the SPY put/call volume, open interest ratios, implied volatility, and short interest.

The SPY put/call volume ratio looks very interesting here. Look at the huge drop off in put volume. Puts were trading about 1.5x calls from October to November due to the banking crash but now two months later SPY puts are trading 0.79x calls, down 47%. During this time the implied volatility on the SPY also peaked and is currently sitting at monthly lows. Look at the relationship between the ETF and the volatility index it looks exactly like the gold/dollar chart I put up earlier. Something needs to give here. The SPY could be setting up for another break to the downside. If that's the case volatility and put volume could pick up again. That's the contrarian view.

SPY Put/Call Volume vs. Price (Schaeffers Research)

SPY Price/Volatility Index (Schaeffers Research)

Now check out the positioned sentiment. Look how the put/call open interest ratio and short interest have been increasing since they bottomed out after Lehman went bankrupt. This shows that investors are still anticipating a move to the downside or just flat out nervous. They don't want to experience the madness again. It's interesting that the put/call open interest ratio is not nearly as high as it was before the banking massacres but short interest increased exponentially (360+ million shares). Also the Feb OI configuration looks pretty ugly. There is currently a bearish view on the market that is drugged up. It will be interesting to see if the market needs a higher dose of it's psychotic meds (fed stimulus) during 4th quarter earnings. Obama and his economic advisors are trying to save the day. I'd say one positive out of this is that 360 million shares will need to be squeezed one day. Lets hope the SPY holds the 50 day and gets squeezed out of the pennant formation.

SPY Put/Call Open Interest vs. Price (Schaeffers Research)

SPY FEB Put/Call Open Interest Configuration (Schaeffers Research)

SPY Short Interest vs. Price (Schaeffers Research)


  1. good stuff.

    I think December was a little bit of an outlier, coming on the heels of the huge volatility spike. Those Feb. numbers are interesting, we'll see.

  2. you think we break out to the upside?

  3. I'm lucky if i get it 50% right, lol, but if I had to guess, I'd say we do something similiar to 2003 and drift here into like Feb. and March but make a lower low in volatility and then the market does ok after that.

  4. I agree 100%, 4Q earnings digestion + Obama stimulus = We drift here in this channel until a long term trend confirmation, lower low in volatility will do it.

    I'm adding you to my Discus friends right now--I'll be back.

  6. haha, thanks for getting me on this thing it's great.

  7. I think in about 2 to 3 weeks you are going to see the VIX start on a trek to make NEW yearly highs. I think the market has one more wave higher, off of SPX 794 or 846, then in about 2 weeks, Just raise your stop losses on all your shorts and ride the market down to who knows where.

  8. New yearly highs on the VIX?! If the VIX hits in the 100s our country would probably be in Chapter 7 bankruptcy.


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