Traders pile into bets stocks may fall as inflation data looms

The ratio reflects the buying of call options, which give a right to purchase shares, relative to the buying of put options, which give a right to sell shares. When the ratio moves higher it suggests that day more traders are betting, or hedging, that shares will fall.

Investors on Wednesday bought 1.81 million put options and 1.17 million calls, the highest daily ratio since markets experienced significant volatility in December 2022.

The move into puts came as the S&P 500
SPX
climbed to within 0.3% of a fresh record close having enjoyed a rally partly powered by hopes easing inflation will allow the Federal Reserve to start lowering borrowing costs within a few months.

The bout of put buying may suggest traders are concerned the stock market could react badly to inflation data for December that is due Thursday at 8:30 a.m. Eastern.

Still, it should be noted that some observers consider such spikes in the buying of put options to be a contrarian indicator which shows investors have suddenly become too fearful.

And indeed, total open positions in individual equity options still shows a bullish slant, with about 190 million calls and 138 million puts as of close on Wednesday.

Furthermore, on the day the individual equity put/call ratio spiked, the same ratio for the S&P 500 index dipped to 1.19, to hover near the bottom of its recent range.