Options Investors Concerned About Volatility: Is the Stock Rally Coming to an End?

Options Investors Worried About Stock Market

Options investors have started to worry that the strong stock rally of 2023 may be coming to an end. Nvidia's strong earnings report released last week did not change investors' cautious approach, and they continue to maintain a careful wait-and-see attitude regarding valuations.

Uncertainties About Bitcoin and Interest Rate Cuts

Bitcoin has lost about a third of its value despite reaching a record level the previous month. As uncertainty about the Federal Reserve's interest rate policies increases, the S&P 500 index is also struggling to maintain its image. Last week, the gap between the index's lowest and highest levels reached the highest point since June.

Importance of Options Cost in Volatility Increase

The cost of options on the Invesco QQQ Trust Series 1 exchange-traded fund has reached its highest levels since August 2024 compared to options on SPDR S&P 500. This indicates a prevailing high-risk perception in the technology sector. Rocky Fishman, founder of Asym 500, noted that the volatility risk premium in the markets remains high.

Short-Term Developments and Market Trends

In line with the S&P 500’s volatility over the past six months, VIX levels are also trading at quite high levels. Vuk Vukovic, Chief Investment Officer at Oraclum Capital, expects an increase in volatility by the end of the year, but anticipates a decline before Christmas.

Expectations for Year-End Rally

Some investors see this situation as a positive signal for a year-end rally. Louis Navellier from Navellier & Associates stated, “It's hard to determine the bottom of the correction, but if positive forecasts emerge about Fed interest rate cuts in December, we could see a significant recovery.”