The Euro STOXX 50 put/call ratio bounces back after hitting a six-month low below 1.0 in late April, a sign that investors have started to add protection to their equity holdings following a sharp three-week rally.
The put/call ratio on the euro zone blue-chip index, which measures the trading volume of put options versus call options and which is used to gauge investor sentiment, has risen to 1.38, up from a low of 0.77 hit on April 25, according to Thomson Reuters Datastream.
A ratio below 1 usually signals bullishness, while a ratio around 1.5 and above usually signals that investors are turning cautious, buying 'puts' as an hedge in case of a market pull-back.
"It's time to take profits on a number of stocks that have performed well lately, and to hedge the portfolios. The level of complacency in the market is very high at the moment and we could get a correction anytime," FXCM (NYSE: FXCM - news) analyst Nicolas Cheron says.
European shares have strongly rallied in the past three weeks, propelling a number of the region's benchmark indexes to multi-year highs, although technical momentum indicators show indexes are 'overbought' and ripe for a pull-back in the short term.
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