When it comes to measuring investor and market sentiment toward a stock or group of stocks, retail investors typically look to buying and selling activity. As revealing as this might be, it does come with a few caveats. These caveats can often cloud the real sentiment or reasoning behind participants doing what they do in the stock market. For example, buying a stock can be straightforward, meaning some profits are hoped to be had, though selling is a different story.
An investor might sell a stock as part of rebalancing a portfolio, for tax purposes, because they see a better opportunity somewhere and need the cash, or for a thousand other reasons. When it comes to selling, investors who assume that the implications are always bearish might miss the big picture. Today, a different sentiment comes through the options market.
