What Happens to Russell 2000 ETF (IWM) When the Put-Call Ratio Spikes Above 1.2?
Put-call ratios above 1.2 signal extreme fear and hedging demand. What happens when put options demand dramatically exceeds call options?
How Russell 2000 ETF (IWM) Responds
Scenario Background
The put-call ratio measures the volume of put options purchased relative to call options. The long-run average runs near 0.85-0.95. Ratios above 1.2 signal extreme fear: investors are buying protection (puts) far more than upside (calls). Such readings historically coincide with market bottoms or panic-driven selloffs.
Read full scenario analysis →Historical Context
The CBOE put-call ratio has exceeded 1.2 on multiple occasions: October 2008 (GFC panic, peak 1.4), May 2010 (flash crash, 1.3), August 2011 (debt-ceiling debacle, 1.3), February 2018 ("Volmageddon", 1.3), March 2020 (COVID, 1.8 peak), and September 2022 (UK gilt crisis, 1.3). Each spike was followed by market bottoms within 2-8 weeks and subsequent rallies of 15-40% over 6-12 months. The 2020 peak at 1.8 was the most extreme reading on record outside of 2008, marking the March 2020 bottom withi...
What to Watch For
- •VIX above 30 alongside put-call above 1.2
- •VIX term-structure inversion (front-month above longer-dated)
- •AAII sentiment bearish reading above 50%
- •Credit spreads widening confirming broader stress
- •Flows into inverse ETFs (SDS, SQQQ) at multi-month highs
Other Assets When the Put-Call Ratio Spikes Above 1.2
Other Scenarios Affecting Russell 2000 ETF (IWM)
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