CBOE released a great article explaining some of the flaws in the Put/Call ratio data circulating on Twitter.
Namely, deep ITM put activity has resulted in a sharp spike in the equity P/C ratio that is nondirectional and unrelated to typical option use cases.
1 method listed for normalizing the data involves exclusion of ITM options entirely: P/C using only OTM and ATM contracts.
Another alternative is to focus on smaller executions. Small Trade P/C avoids the distortion of large early-exercise activity for a clearer picture of small-trader sentiment.
When normalized, P/C ratio is certainly elevated, but not beyond levels seen in each of the previous market downturns of the last 5 yrs.
https://twitter.com/Marlin_Capital/status/1610450796247920641
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