The stock market has recently been one of the roughest on record, but you wouldn’t have known that if you were watching the news. CBOE Volatility Index. Friday’s decline made things even clearer.
Semiconductor stocks rose 80% for the second month in a row, adding about $5 trillion in market capitalization. Nasdaq 100which spurred one of the most successful ETF launches in history and spawned dozens of spectacular parabolic single-stock moves, finally hit a wall on Friday. VanEck Semiconductor ETF (SMH) At its low point, it fell nearly 10%.
The VIX index just hit its lowest since January on Thursday, marking its biggest single-day gain since March. S&P500 CBOE index option trades reached a record high of 7.8 million contracts on Friday, 16% above the previous record set in April.
For many, the decline is a warning sign of over-speculation in the face of trillions of dollars in IPOs and the possibility of rising interest rates. For options traders who have been watching the roller coaster of individual stocks, this looks more like a belated catch-up by the broader index.
CBOE Volatility Index for the past 5 business days
Several key volatility indicators have become extreme this week. The divergence between individual stock volatility and the broader index was the largest since Cboe began tracking the data, and the one-month implied correlation between the top 50 stocks and the index was the lowest in a year.
What seemed most out of place was the VIX falling below its long-term average.
“Everything is resynchronizing,” Brent Kotuba, founder of options analysis platform Spot Gamma, said on a conference call. “The content of the call was as follows. micron If the premium was higher spy and QQQ Combined, this problem had to be solved. VIX is rising, but it is not abnormal. ”
The bond market was far from a stabilizer. of 10 year treasury Stocks fell 40 basis points as options traders flooded with bearish bets after Friday’s strong jobs report. iShares 20+ Years Government Bond ETF (TLT) Not just corporate bond funds iShares iBoxx Investment Grade Corporate Bond ETF (LQD) and iShares iBoxx High Yield Corporate Bond ETF (HYG)where we place more than 8 to 1 calls.
Rising yields may have added further pain to crypto trading. Bitcoin I managed to keep $60,000 after falling just below that threshold, but Michael Saylor’s strategy The stock fell nearly 7% as options traders bought more than twice as many puts as calls.
All of this adds up to the Nasdaq’s worst day since April 2025.
“The cascading decline didn’t take long,” said Danny Kirsch, head of options at Piper Sandler. “Leveraged ETFs have a ton of assets, especially around semis, and big hyperscalers Meta and Alphabet are issuing shares ahead of their big IPOs…Not great, Bob.”
