AppleOption STP is selling a short call after this most recent rally.

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Examine the CBOE Intra-Day Volume and more specifically the Equity Put/Call Ratio. AppleOption graphed the 2008 historical equity put/call ratio for every day (see below).

For 2008 the average put/call ratio has been 0.764 while the range has been 0.56 to 1.35. Friday June 20th, the market had a 0.91 ratio. Meaning nearly equal amounts of puts were trade to calls. Remember Puts is in the numerator (top) and as this value increases greater than calls the ratio value is greater than one. While general market (the average) typically trades a ratio of 0.76, the overall sentiment recently has increased the put volume significantly.

The peak in put trading represents an overwhelming majority of investors are establishing speculative short plays or portfolio protection. Now if the market has already declined… then who else is left to sell?

As the markets continue a pullback today, one must question whether we are reaching/reached a “peak” in put trading and the bottom of this decline. If so, then smart money will view the peak in negative sentiment as a buying opportunity.