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

Options Investors Are Concerned in the Stock Market

Options investors have begun to worry that the strong stock rally of 2023 may be coming to an end. The strong earnings reported by Nvidia last week did not change investors’ cautious approach, and there is still a careful wait regarding valuations.

Uncertainties About Bitcoin and Interest Rate Cuts

Bitcoin, despite reaching a record level last month, has lost about a third of its value currently. As uncertainties regarding Federal Reserve’s interest rate policies increase, the S&P 500 index is also struggling to change its outlook. Last week, the gap between the index's lowest and highest levels reached its highest point since June.

The Importance of Options Costs 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 SPDR S&P 500 options. This situation indicates that there is a dominant high-risk perception in the technology sector. Rocky Fishman, founder of Asym 500, pointed out that the volatility risk premium in the markets remains high.

Short-Term Developments and Market Trends

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

Expectations for Year-End Rally

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