Wall Street’s ‘fear gauge’ punches back as the ‘crash up’ in chip stocks finally reverses
It was one of the craziest stock markets on record in recent memory, but you wouldn’t know it by looking at the markets. Cboe Volatility Index. Friday’s sell-off made things even clearer.
A two-month straight 80% rally in semiconductor stocks has added nearly half a trillion dollars to market value. Nasdaq 100The stock moves that spurred one of the most successful ETF launches in history and spawned dozens of eye-popping, parabolic single-stock moves finally hit a wall on Friday. VanEck Semiconductor ETF (SMH) At its lowest point, it was down almost 10%.
The VIX hit its lowest level since January on Thursday, marking its biggest single-day rise since March. S&P 500 Index options trading reached 7.8 million contracts on Cboe on Friday, a record 16% higher than the previous record set in April.
For many, the selloff is being read as a warning sign of trillions of dollars of speculative excess in the upcoming IPO and the potential for a rise in interest rates. For options investors tracking the ups and downs of individual stocks, this looks like an overdue catch-up by the broader index.
Cboe Volatility Index over the last five trading days
Heading into this week, a handful of key volatility metrics were at extremes. The gap between single-stock volatility and the broader index was widest since Cboe began tracking the data, and the one-month implied correlation between the top 50 stocks and the index hit a one-year low.
What seemed most inappropriate was the VIX falling below its long-term average.
“Everything is being resynchronized,” Brent Kochuba, founder of options analysis platform SpotGamma, said in a call. “The calls were very rich with things like: Micron where premiums are larger SPY And QQQ combined, this thing had to come down. “VIX is up, but not crazy.”
The bond market was far from underweight. 10 year Treasury It fell 40 basis points after Friday’s strong employment data and options traders turned to bearish bets on the US Dollar. iShares 20+ Year Treasury Bond ETF (TLT) and corporate bond funds iShares iBoxx Investment Grade Corporate Bond ETF (LQD) And iShares iBoxx High Yield Corporate Bond ETF (HYG)here the outnumbered calls are more than 8 to 1.
Higher returns may have added extra pain to crypto trading. bitcoin After a brief trip below that threshold, he managed to keep $60,000, but Michael Saylor Strategy It fell nearly 7% as options traders more than doubled their calls.
Put it all together and you have the worst day for Nasdaq since April 2025.
“It didn’t take much to get lower,” said Danny Kirsch, head of options at Piper Sandler. “There are tremendous assets in leveraged ETFs, especially tied to semi-futures, and giant hyperscalers Meta and Alphabet are issuing shares ahead of a major IPO… not very good, Bob.”
