Wall Street's fear gauge tumbles as traders bid up SpaceX shares
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- Cboe Volatility Index fell below 16 on Monday, fully unwinding the volatility spike that began June 5 when the VanEck Semiconductor ETF (SMH) dropped more than 10% from its record high.
- SpaceX shares rose 13% Monday, pushing its market cap to nearly $2.5 trillion after the largest IPO in history was absorbed without market disruption.
- Nasdaq 100 jumped 3% while the S&P 500 gained 1.7%, nearing the record set earlier this month, as semiconductors added more than 4% to reach a fresh all-time high.
- VIX options flows skewed defensive — more puts than calls traded, with roughly $70 million of the $93 million in total premium tied to puts, per SpotGamma and ThinkOrSwim data.
- SMH options continued to lean bearish at roughly 60% put premium, though the largest single trader collected $5 million selling July 17 put spreads before spending $2.7 million going long the 600/550 spread.
- Cboe senior director of derivatives market intelligence Ed Tom attributed the outsized VIX decline to the unwind of protective next-12-months hedges and downside convexity positions.
- SpaceX options begin trading Tuesday, adding a new single-name derivatives venue where Tesla options have long been a retail favorite.
Why it matters: The roughly $2 trillion IPO wave that spooked the market ten days ago is now fueling a relief rally, with the VIX unwinding entirely and semis hitting fresh highs. The split between defensive SMH options flows and outright bullish index positioning shows institutional traders are hedging the chip trade even as they chase the broader rally.
