“Prices move when expectations change. When sentiment bottoms out expectations can, by definition, only change for the better. But bad sentiment can get worse. Have we truly bottomed out here?
I spoke with Garrett DeSimone, head of research at the options market data provider OptionMetrics, about the elevated put buying mentioned in the Bloomberg piece. He was quite sanguine. Rather than total put money flows, DeSimone prefers to watch put-call skew, which is the difference between the premiums put buyers have to pay for puts and calls with the same expiration.
Below is a chart of skew for S&P 500 options, which is only slightly above zero. ‘We are seeing increased volume in put activity, but it is not translating into increased pricing of downside risk … skew is elevated but nothing crazy.’ This is equally true for the index and for heavily traded individual names such as Amazon, Apple, Tesla, and Google. ‘I wouldn’t call this extreme fear by any means’ he says.”
The full Financial Times article, “Sentiment is not quite as bad (ie good) as it seems,” is available below and features insight from OptionMetrics’ head quant Garrett DeSimone. Read now.