A trader works during the Hawkeye 360 Inc. initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, US, on Thursday, May 7, 2026.
Michael Nagle | Bloomberg | Getty Images
Stock bulls proved resilient in the face of what could have been the worst sell-off in the Nasdaq 100 since March, as the index staged a 1.5% intraday rally into the close and the S&P 500 ended less than 12 points lower on Tuesday.
The turbulence helped sort out where options traders have the most conviction.
Most notable might be that volatility in the S&P 500 as measured by the Cboe VIX Index ended down on the day, despite a brief pop to 19.01, the highest since April 28. It’s the latest example of the disconnect in volatility between the benchmark index and its individual components, who are seeing massive swings and soaring options prices.
Cboe Volatility index, YTD
The muted VIX arguably presents a hedging opportunity that looks cheap in comparison to volatility in semiconductor stocks that’s 2.5 times more expensive. That trade seemed to get some attention Tuesday as VIX options were the 10th most-active traded, with four times more calls bought than puts.
“We like owning June VIX calls as a hedge with oil going above $100,” Brent Kochuba, founder of options-data provider SpotGamma, wrote in a note to clients Tuesday morning.
Recent tech winners like Qualcomm, Intel and memory stocks posted big pullbacks as crude oil pushed above $102 and the 10-year Treasury yield touched the highest since July.
Options flow in tech ETFs SMH, QQQ and DRAM did shift less bullish, with more calls sold than bought in each, but total premiums still lean towards calls in all three, in particular in DRAM. In SMH, more puts were sold than bought.
Bearish conviction was clearer in bonds, with heavy call selling and put-buying in the iShares long-term bond ETF (TLT), which dropped two-thirds of a percent to a near one-year low after CPI data showed the warmest reading in almost three years.
Traders bought more than 151,000 TLT puts and sold just 97,000, while purchasing less than 76,000 calls, according to ThinkOrSwim data. One trader spent more than $1 million buying 24,000 of the July 81 puts, looking for at least a 5% drop in two months.
The ETF traded just shy of 600,000 contracts on the day, the 13th-busiest ticker in the session, according to SpotGamma.
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