Options investors reacted to new confidence in the tax bills' impact on equity markets by sending the Chicago Board Options Exchange's composite put/call ratio to its lowest levels in at least three years. The ratio was 0.71 at Wednesday's close, just a tick higher than the 0.68 at Tuesday's close -- a stark contrast to previous weeks, when the average ratio was about 0.95.
Weighing their options
The metric tracks exposure to options for both indexes and individual equities, with volume in index options typically higher than equity options. Volume in equity options jumped 37% this week over the prior week; index option volume was up 28%. While a decline in the ratio implies that call interest is higher than put interest, volume has increased on both sides as investors are positive on the market but still feel the need to hedge.