Wall Street’s ‘fear gauge’ is doing something unusual. What it means
A dealer works on the ground on the New York Stock Exchange (NYSE) in New York City, US, April 23, 2026.
Jeenah Moon | Reuters
Something attention-grabbing is taking place within the choices market.
The S&P 500 touched file highs Thursday morning, however the Cboe Volatility Index (VIX) remained caught close to 20 and is up since 5 days in the past, when the S&P traded about 100 factors decrease.
In different phrases, shares went up and so did the market’s so-called concern gauge.
Cboe Volatility Index, 1 month
The VIX and S&P do transfer in tandem about 20% of the time, but when a “VIX-up/stocks-up” atmosphere lingers for quite a lot of days it means a couple of issues are probably taking place beneath the floor of the market.
One clarification is merely that buyers are uncertain of recent highs in shares and hedging in opposition to dangers just like the Iran conflict and crude oil. If that is the case, merchants needs to be cautious of near-term pullbacks within the index as realized volatility “catches up” to VIX.
Another clarification
A extra bullish interpretation – one that matches with what we see in choices buying and selling round earnings – is that merchants are prepared to purchase costly premiums in upside calls in single shares which might be making massive strikes greater, significantly within the semiconductors and tech names which might be main the rally.
Total name premium within the VanEck Semiconductor ETF (SMH) is 25% larger than in places regardless of put quantity being larger.
Take one commerce in chip inventory Marvell Technology for instance. The inventory has already doubled since earnings final month, however one dealer shelled out $2.4 million to purchase virtually 1,700 contracts expiring June 18 at a strike of $180, in search of one other 10% rally from right here.
Marvell Technology, 1 month
That enthusiasm is retaining choices costs inflated, which may assist clarify why VIX is so sticky.
