Option buyers targeting the precious metals sector with renewed interest lately
Option buyers are getting excited, or at least that’s what I gather from the equity only buy-to-open (BTO) call/put ratio, which recently surged to its highest level since the first half of 2022.
We aggregate options volume data from three different exchanges — the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) — and only consider options that were bought to open. This filters out the closing volume and volume initiated by sellers, so it’s closer to speculative option buying, which is what want o analyze. In this article, I will break down this data and see which sectors option buyers have been betting on.
Driving the Ratio
The increasing call/put ratio could be driven by increasing call buying or decreasing put buying. The chart below shows traders loading up on calls is driving the ratio higher. The 20-day put volume is at the high end of its range, but relatively flat compared to the 20-day call volume, which has surged to its highest level going back to at least 2022.
Sector Breakdown
The table below breaks down the 20-day BTO option volume by sector, and sorts them by volume. The first sector is technology hardware, which includes Nvidia (NVDA) and Apple (AAPL). The current BTO call/put ratio is 1.95, which is less than the overall ratio (about 2.25), but it’s higher than its average since 2022 of 1.49. The last column shows that sector has had a huge volume spike, with its current BTO volume being 2.28 times the average since 2022.
The precious metals sector has the highest call/put ratio, but that’s not new, as that has been the case since 2022. Looking at the column named “Change in Ratio,” the telecom services sector is the one call buyers have shifted to the most relative to put buyers. For telecom services, the BTO call/put ratio went from an average of 1.91 to its current ratio of 3.37, which is the biggest change in the table.
However, volume has taken a hit, with the recent volume being just 65% of its average volume. I consider a more dramatic shift happening for retailers. Its call/put ratio has averaged 1.78 since 2022, but is now at 2.89, and that’s on 25% more volume than average.
There’s only one sector in which option buyers have preferred puts. The BTO call/put ratio for real estate investment trusts is at 0.95. However, that’s higher than the average for that sector of 0.74. Healthcare providers and electronics sectors where option buyers have made the biggest change toward puts. For healthcare providers, the ratio fell from an average of 2.15 to currently 1.31, and that’s on volume that is almost double its average since 2022.
