Put-Call Parity

See: Put-Call Ratio.

Add up all the puts out there. Add up all the calls out there. (They track totals on the Street.) When puts are twice as plentiful as calls, then highly educated derivatives traders (making $10 million a year, for starters) are telling the market, via their actions or trades, that they're bearish on things overall. That is, the big, smart brains are betting that the market's going down before it goes up again.

You have the reverse with calls. And yes, the strike prices and durations all have to be adjusted and averaged. But if you're sampling all of them, then the entire universe of them is kind of a normal curve, and is adjusted such that it represents a good sample of sentiment. When they're about the same number, there's just...meh. Confusion. Fear. Uncertainty. Doubt. CFUD. Like the sound when you clear your throat after a huge bowl of ice cream. When the put-call ratio is about even, derivatives traders are giving no real view as to where the overall market is heading. So, um...beware.