By John Del Vecchio and Brad Lamensdorf
Small speculators are partying like it’s 1999.
Not since the Internet Bubble has option activity from small options traders, those trading 10 contracts or less, has been so speculative.
The chart below, courtesy of SentimenTrader, shows the put-to-call ratio nosediving.
The result, with this call buying activity, is that retail traders have become more speculative than any time in two decades.
Collectively, the impact of small traders’ speculation has increased significantly.
Small trader call buying is equivalent to over 9% of the volume on the New York Stock Exchange.
That’s a new record!
The speculative fervor can continue. However, in our experience, extremes in both greed and fear lead ultimately lead to tears for those too greedy or too fearful.
Now is the time for hedges to be prepped.
Small traders don’t know anything you don’t. Instead, they’re falling over each other placing bets to satisfy their greed.
Active Alts has partnered with SentimenTrader to use contrarian and other indicators to measure risk and manage market exposure. The Active Alts SentimenTrader Long / Short Strategy returned 25.91% in 2020.
To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad.
DISCLOSURE: LAMENSDORF MARKET TIMING REPORT
Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.
This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s Nor any investment Advisors.
Past performance is not indicative of future results. Active Alts is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader.