Put buying surge signals market fear as people seek ‘protection’

00:00 Speaker A

Stocks are back to being in the red. Uh now that we have been talking a little bit we got your S&P off about uh three tenths, seven tenths of a percent in tech heavy Nasdaq off about seven tenths of a percent. But I do want to bring our guest host Chris back into the conversation. Chris, how are you thinking about this move this morning and anything that you want to ask JJ as well in terms of the options action?

00:26 Chris

Well, I I I am I totally with JJ. I understand the point. There’s a lot of volatility out there. It very quite right. I’m curious though about how much put buying you think the market’s done in aggregate? Because obviously it’s a terrific indication of fear and it was building last week. Would you would you say we’ve almost done enough put buying? I mean that’s often a sign the market needs to find a floor at least temporarily.

01:00 JJ

Well, yeah, and and and you know, you did you did see people buy more puts and calls. I think you have to be a little bit careful of looking at that Chris for one reason and that is you you’re not sure why people are buying them and what’s on the other side of the trade again options being a derivative product. You’re never quite sure what people are doing it for. But to your point, we saw the biggest amount of options ever trade last Friday. We saw puts and calls fairly even, which you don’t normally see to your point Chris. It’s usually more calls than puts. So people have actually absolutely been coming in for protection. And so, you know, you you’re seeing VIX hold up. When you see VIX hold up, shows me that they may not be as aggressive in their buying, but they’re certainly there to buy. There are very aggressive bids for puts. It’s not backing off at all. People want protection. And quite honestly, people may want protection both ways because we’ve had we just saw how quickly the S&Ps can rally 200 points and come back down. So you may see people who are buying both sides or if they’re long stock, selling their calls in order to buy puts because they want that protection and they just don’t want to pay a lot for it.