After reaching all-time highs, the semiconductor sector has experienced a sharp downturn, with traders now turning to the Direxion Daily Semiconductor Bear 3X Shares (SOXS) as a cost-effective method to speculate on further declines in chip stocks.
Options trading in SOXS has surged, with volume exceeding three times the daily average, and calls significantly outpacing puts at a ratio of more than six-to-one. This ETF is designed to deliver 300% of the inverse daily move of the NYSE Semiconductor Index, making it a popular choice for those anticipating a continued downturn in the sector.
The popularity of levered ETFs has grown, particularly in light of the substantial gains seen in chip stocks over the past year, with daily rebalancing flows often surpassing $20 billion. Currently priced at just over $4 per share, SOXS provides an accessible entry point for traders.
On a recent trading day, approximately 260,000 options were exchanged, with over 84,000 calls purchased compared to around 15,000 puts. The trading activity suggests that many investors are hedging their bullish positions through spreads, which could limit potential gains if the ETF continues to rise, as it did with a 24% rally.
Notably, the most active contracts included in-the-money calls with strikes of 4 and 3.5, set to expire soon. Additionally, a significant trade involved the sale of 300 in-the-money puts expiring in January 2028, indicating a strategy to establish a synthetic long position at a lower cost than outright stock purchases