Surging Trading Of Bullish Options Suggest Investor Euphoria

Surging Trading Of Bullish Options Suggest Investor Euphoria
Andrew Rummer

about 3 years ago1 min

As US stocks steer a course for another record close on Friday, the number of shares changing hands (shown in blue on the chart) is – bizarrely – surging.  

Most of the time, trading volumes climb during sudden market sell-offs and are more subdued when stocks are steadily grinding higher. 

About 16 billion shares are currently changing hands each day on US exchanges, roughly twice the volume of a decade ago. But that’s nothing compared to the 3.5x surge in call options volume. (The jump in trading of these derivatives – used to bet on future stock-price gains, and beloved by users of the Robinhood app – is shown in yellow). 

It’s hard not to read these two data points as further signs of investor exuberance. Only time will tell if that exuberance is rational or irrational...

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