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These Three Options Charts Point to More Gains for U.S. Stocks

U.S. investors expect the snapback in equities to persist.

These Three Options Charts Point to More Gains for U.S. Stocks
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)  

(Bloomberg) -- U.S. investors expect the snapback in equities to persist, according to signals from the options market.

Stock investors paid less to protect from a selloff last week after the S&P 500 Index surged 3.5 percent and entered the ninth year of the current bull market. The price of puts on the benchmark for American equities fell relative to the price of calls, Credit Suisse Group AG equity-derivatives strategist Mandy Xu wrote in a report Monday.

The retreat in the measure, known as skew, “signals more tactically bullish positioning in the near-term as investors chase the rally,” she wrote.

The S&P 500 climbed last week as the monthly U.S. jobs report showed hiring without strong signs of wage inflation, and President Donald Trump indicated that he was more flexible than expected on his proposed tariffs.

These Three Options Charts Point to More Gains for U.S. Stocks

In another sign of bullishness, “volatility of volatility” as measured by the Cboe VVIX Index, has entirely retraced a surge in early February that took the gauge to a record, the Credit Suisse report indicated.

“VIX call demand remains lackluster,” Xu said in the Credit Suisse report.

These Three Options Charts Point to More Gains for U.S. Stocks

In addition, the Cboe Equity Put/Call Ratio is falling to near pre-meltdown levels. The index measures the volume of equity puts versus calls, so it will rise on an increase in appetite for bearish bets and fall when there’s more demand for bullish ones.

These Three Options Charts Point to More Gains for U.S. Stocks

--With assistance from Luke Kawa and Brandon Kochkodin

To contact the reporter on this story: Joanna Ossinger in New York at jossinger@bloomberg.net.

To contact the editors responsible for this story: Tracy Alloway at talloway@bloomberg.net, Eric J. Weiner, Brendan Walsh

©2018 Bloomberg L.P.