The VanEck Semiconductor ETF (SMH) has seen a sharp decline, dropping more than 10% from its recent record high, prompting a surge in bearish options trading. As of midday Tuesday, put options outnumbered call options by a factor of four, with over $260 million of the nearly $350 million in premium traded linked to puts.
This trend reflects a significant change in investor sentiment, particularly among those who previously favored semiconductor stocks due to their association with the artificial intelligence boom.
Don Kaufman, co-founder of TheoTrade, noted that the recent selloff is likely to continue, as the buying of puts could compel market-makers to short stocks or sell Nasdaq futures, potentially amplifying the downward pressure. This bearish sentiment is also evident in the broader Nasdaq 100, where approximately $2.5 billion of the $3.7 billion traded in Invesco QQQ ETF options were puts.
The most actively traded put options in QQQ are the 700-strike and 715-strike contracts, indicating a strong preference for bearish positions. Even the Roundhill Memory ETF (DRAM), which had previously seen balanced trading, is now experiencing a shift towards puts, with over 24,000 puts purchased compared to under 15,000 calls.
This overall trend suggests that investors are increasingly cautious about the semiconductor sector's outlook, which could have broader implications for the technology market