Traders are really optimistic about the technology.
A measure of volatility linked to the Nasdaq 100 Index posted gains for the month, rising in tandem with the Nasdaq 100 Index itself, which was up around 8%. The lockstep moves show how the recent rally in tech stocks is upending traditional derivatives market dynamics. Typically, market volatility decreases when stock prices increase and vice versa.
behind the movements? According to Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, the tech rally has sparked a rush for bullish option bets that would pay off if the sector continues to rise, as well as option hedging that would protect any gains accumulated by investors . This has also led to increased volatility on the Nasdaq.
This is typically a sign of extreme optimism and reflects just how much excitement surrounding artificial intelligence is gripping the stock and derivatives markets. For example, traders have pushed prices higher on Nvidia-related bullish options.
Volatility also rose along with stock prices for meme stocks in 2021 as investors rushed to place big bets on stocks like AMC Entertainment and GameStop.
Some traders seemed surprised by the big rally and turned to the options market for a catch-up trade.
“Many missed this surge,” said Jeremy Wien, managing partner at Moo Point Capital Management. “Either they want to get in (FOMO) or they need to get in (underperforming).”