Chart Source: Market Harmonics

The charts below show the current and historical Put/Call ratio forthe US stock market.

The Put/Call Ratio is derived by dividing the total number (volume) of options put contracts purchased by the number of option calls, for a given trading day. The Put/Call Ratio thus measures the degree of bullishness or bearishness in the market, based on the ratio of Puts purchased to Calls purchased.

Equity-only ratio significant tends to reflect the sentiment of the general community of investors and speculators to a greater extent than those who trade options on indices, which are more commonly used by professionals and large investors.

A bigger percentage of traders on Index options are large institutions and professionals. Their sentiment can be measured by Index Put/Call ratio.

LEAPS are long-term option contracts with expirations of up to 3 years, and can provide a read on the forward-looking expectations of investors. Since they aren’t so great for trading, given the fairly low volatility, they represent the activity of investors more than traders.