Despite tumbling stock prices, options traders don’t appear eager to step in to buy the dip. Reuters reports:
Even as stocks tumbled, however, there were few signs in the options market that traders were expecting the sell-off to abate soon.
“I am not seeing much along the line of ‘quick end to the sell-off’,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.
“It still looks pretty fearful,” Murphy said.
On Monday, overall trading in put options, typically used to place defensive or bearish bets on stock and index prices, outnumbered trading in bullish call options by 1.1-to-1. That’s the most bearish that ratio has been since March 2020, according to Trade Alert data.
“This is definitely more severe than anything we have seen in pretty close to two years,” said Randy Frederick, vice president of trading and derivatives for the Schwab Center for Financial Research.
“Buying the dip” has been a particularly well-rewarded strategy in recent years, where traders in stocks and options have profited handsomely from betting on a rapid rebound anytime stocks stumbled.
While there were some stray bets on upside Monday, more broadly, traders appeared to be staying away from dip-buying, Susquehanna’s Murphy said.
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