There’s been a lot of discussion recently about the CBOE Equity Put/Call Ratio, especially after Friday’s reading came in at 0.45—a 10th percentile level. This means traders were buying far more calls than puts, a sign of excessive optimism.
As a contrarian indicator, this excites the bears. The logic is simple: when everyone is positioned for upside, the market may be vulnerable to disappointment. Historically, extreme optimism has preceded major pullbacks—but the relationship isn’t clean. The put/call ratio is noisy and not reliable as a standalone timing tool.
That said, the data does suggest that the S&P 500 tends to underperform on an intermediate horizon following such readings. Combine this with September’s seasonal weakness, and it raises the question:
Will excessive optimism in the options market, paired with the historically soft end of September, set the stage for market weakness?
From my perspective, a pullback feels increasingly likely.
