Micron Memory Japan Co., Ltd. booth at the SEMICON Japan exhibition held in Tokyo on December 18, 2025.
Kiyoshi Ota | Bloomberg | Getty Images
The rally in semiconductor stocks has been incredible, and traders can’t help but bet on it.
Open interest in a put contract of VanEck Semiconductor ETF (SMH) In the past two months, call subscriptions have soared to just under 1.7 million, a record high, according to Bloomberg data since the fund was founded in 2011. In contrast, there are just over 500,000 unpaid telephone contracts.
At the same time, SMH’s implied volatility has been rising, approaching 55% on Tuesday, nearing its highest level in more than a year. That’s a sign that the puts are mostly bought, said Zed Francis, chief investment officer at Chicago-based Convexitas.
“People are not leaning into this move, they’re hedging against this move,” said Francis, who runs a semiconductor options trading strategy on behalf of clients. “We’ve had such a quantum leap in the space, but it’s resulting in hedging activity rather than tracking. So this could be more sustainable than boom and bust.”
Outright bearish speculation may not tell the full story of the buildup of sector ETF puts. The appeal of SMH’s puts may also have to do with how geeky and expensive option trading on individual stocks has become.
Just as the implied volatility of the chips sector is high compared to the broader S&P 500’s 16% volume, the implied volatility of individual stocks is even higher. That said, there may be situations where a trader finds it advantageous to use a sector ETF instead of trading in a single stock, such as: micronHere, the implied volatility is 105%.
“If you were to start trading when the volume is 100 to 120 percent with reverse skew, what kind of strategy would you use?” TheoTrade co-founder Don Kaufman said on a call after the bell. “At Micron, implied volatility just spiked, so at SMH we were on the other side.”
Mr. Kaufman purchased a 535/525 strike put spread on SMH that expires at the end of August.
“I have a much more out-of-the-money strategy on this and am looking for the ultimate bounce with a 30-delta spread,” he said. “The squeeze should end soon. Who in their right mind would want to spend this much money on something so shockingly stupid?”
