Energy stocks have slid in the past three sessions, after a big bounce since mid-March, and the options market could be throwing off signs that the comeback is over for good.
In a recent note to clients, Goldman Sachs' options research team wrote: "We recently changed our view from bullish to bearish on energy as option markets show extreme complacency following the sharp rally in the energy complex over the past six weeks."
Specifically, Goldman found that the prices of bearish put options have fallen considerably, indicating that investors see diminished risk of downside as traders have become far more optimistic. But for Goldman, that's a clear sign that the energy rally has run out of steam.
"We find options have been a powerful contrarian indicator over the past year," and once again, it will pay to look the direction that the market isn't looking, the analysts concluded.