S&P 500 futures are trading at all-time highs even as market breadth stays thin, with far more stocks hitting new lows than new highs. Options traders are nonetheless piling into bullish options positions across indexes and key tech names, signaling they expect fresh records soon.
S&P 500 futures sit at record levels, but the rally is narrow. On the New York Stock Exchange Tuesday, 75 stocks made new 52-week lows, versus just 14 names making new highs.
Options traders lean bullish
Monday's rally in stocks was strong enough that even institutional market-makers appeared caught offsides, buying upside calls to keep pace with the momentum. The volume ratio of calls to puts climbed to its highest since May, and for the SPDR S&P 500 ETF Trust (SPY), the ratio reached its highest level since the first week of August, according to Barchart data.
The Invesco QQQ Trust (QQQ) showed a similar pattern, with its call-to-put ratio hitting the highest level in at least a year. Options pricing on trading platform ThinkOrSwim now puts the odds that the Nasdaq 100 touches a new high by the end of the week at more than 67%.
Meta, Intel and Micron in traders' sights
Options pricing in the tech names driving the rally also skews bullish, with market-makers pricing in new records for Meta Platforms, Intel and Micron before year-end. In Meta, where options volume this week is more than four times the 30-day average, implied volatility is higher for calls than puts across the options term structure, according to Barchart data. There's a 52% chance the stock touches $790, its closing high from last year, by Oct. 2, according to ThinkOrSwim pricing.
Intel, up 35% in the past month, has become the latest leader of the semiconductor trade and carries an implied volatility of 69 as options trading picks up in the one-time laggard of the AI trade. Market-makers are assigning roughly a coin-flip chance that it reaches above its closing high of about $140 between now and Oct. 30.
Memory stocks add to the rally
Tuesday's rally got a further boost from a 2% advance in memory stocks tracked by the Roundhill Memory ETF (DRAM). Shares of Sandisk rose more than 6%. Shares of Micron gained more than 3%.
Options pricing points to a new high in Micron by Oct. 23, and for Sandisk by Dec. 18. For the DRAM ETF, whose implied volatility has plunged since summer, market-makers are pricing in just a 34% chance of a new high by Dec. 18.
Source: CNBC
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