Rally in chip stocks becomes the most hated in history. Here's the data
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- VanEck Semiconductor ETF (SMH): Open interest in put contracts rose to just under 1.7 million over the past two months, the highest level recorded since the fund’s 2011 launch, while call contracts remain just above 500,000.
- SMH: Implied volatility climbed to about 55 % on Tuesday, the highest in more than a year and far above the S&P 500’s 16 % level.
- Zed Francis, CIO of Convexitas: Said traders are hedging the chip rally rather than chasing it, indicating the surge may be more sustainable than a typical boom‑and‑bust cycle.
- Don Kaufman, co‑founder of TheoTrade: Purchased a 535/525‑strike put spread on SMH expiring late August, a 30‑delta, far‑out‑of‑the‑money position betting on a pullback.
- Micron: Implied volatility for the stock sits near 105 %, prompting some traders to favor the sector ETF for options strategies.
Why it matters: Options traders profit from the record SMH put surge, while chip makers face heightened hedging pressure as implied volatility climbs to 55 %, a shift that limits further upside for semiconductor stocks.
