I like to think the option writer usually has better info regarding the stock (fundamentally and technically). The higher put OI indicates, to me, options writers are willing to take the risk of a falling stock price, and have the stock put to them.
Calls are the opposite. When there is a lot of Call OI and very little Put OI, I regard that as possibly being near an intermediate term top. The call sellers are essentially saying they are willing to sell the stock at that price. Thus, high ratio of call OI to put OI is a bearish outlook.
However, the selling of call options can simply reflect somebody wanting to take part in some quick premium money. When a stock moves up quickly, the volatility expands, causing the option prices to increase. Thus, a savvy investor can turn around and generate some good profits, quickly, in a stock which is running. And even though they won't fully participate in the stocks total move, they make good profits quickly. This last point is important because, there is a lot of momentum buying going on these days. When a stock begins to run, it attracts attention and thus perpetuates the buying. The high call OI, could simply reflect the savvy option writers desire to turn a good quick profit, safely; rather than indicating a top is in. But it is something to keep an eye on. I hope this is helpful. |
