Retail traders are currently exhibiting a high level of bullishness, reminiscent of the trading frenzy during the COVID-19 pandemic. According to a report from Cboe, traders are buying call options in the 'Mag 10' stocks, which include major companies like AMD, Palantir, and Broadcom, at the highest rate seen in the last two years.
Specifically, 52% of new positions opened were call-buying, while only 17% were call-selling. Mandy Xu, head of derivatives market intelligence at Cboe, noted that this trend indicates that hedgers are becoming less active, with many investors eager to capitalize on the ongoing market rally.
This shift in sentiment is significant, especially considering that just a month prior, call-buying metrics were lower due to concerns over geopolitical issues and fluctuating crude oil prices. The current optimism is further supported by data showing that the price of out-of-the-money call contracts on the Nasdaq-100 index has reached a 52-week high, approaching a three-year record.
Scott Nations, president of Nations Indexes, highlighted that the lack of interest in selling covered calls indicates a deeper level of bullish sentiment among traders. The Nasdaq-100 recently set a new record, achieving a year-to-date gain of over 16%, driven by strong performances in the semiconductor sector, which now constitutes nearly 20% of the S&P 500's market capitalization.
Additionally, the market rally has led options traders to focus more on individual stocks rather than indexes, resulting in increased volatility for single stocks. Data from Robinhood Markets shows that retail investors are actively buying tech stocks like Nvidia, Tesla, and Microsoft while selling shares of companies like Costco and Alibaba.
Steve Quirk, chief brokerage officer at Robinhood, remarked that these investors have a strong belief in technology and innovation, consistently seizing opportunities to invest in leading tech firms