Nasdaq-100 hedging rises as options market signals caution on tech stocks

Traders Union
All News
Financial News
Nasdaq-100 hedging rises

Highlights

Nasdaq-100 Index falls as much as 1.8% Thursday amid OpenAI revenue concerns, pushing QQQ's put-call ratio to 1.49, highest since late June.
Defensive options trades spike, including bearish moves in SPDR S&P 500 ETF Trust and Meta Platforms, while QQQ put-call ratio shifts toward puts since August despite tech highs.
Thursday's intraday QQQ trades show split sentiment with a $15 million March put sale and an $8 million March call buy offset by a $20 million bearish Jan/Oct spread after close.

Options positioning points to deeper caution

As reported by CNBC, citing the Financial Times, concerns over OpenAI revenue momentum help push the Nasdaq-100 Index down as much as 1.8% on Thursday, adding to pressure already building around the AI complex. During that move, the number of open put contracts tied to the Invesco QQQ Trust relative to calls reaches 1.49, the highest level since the last week of June, according to Barchart data.

The shift is not limited to a single trading session. The put-call ratio in QQQ has been moving in favor of puts since August, even as large-cap technology shares continue climbing and notch a run of record highs through Tuesday.

Other large options trades also reflect a more defensive tone. On Wednesday, the two biggest options trades of the session, one in the State Street SPDR S&P 500 ETF Trust and another in Meta Platforms, are bearish, suggesting traders are adding protection against a possible pullback linked either to rising rates or weakening confidence in the AI narrative.

Mixed signals complicate the market outlook

Reading the options market remains difficult because heavier hedging can also cushion a selloff if those positions turn profitable and provide support. At the same time, the put-call ratio in the State Street SPDR S&P 500 ETF Trust and the S&P 500 Index stays near average, indicating the defensive shift is more concentrated in tech-focused positioning.

Thursday's biggest intraday QQQ trades further underline that split message. At 11 a.m. ET, the largest trade is a $15 million sale of nearly 5,000 March 740-strike puts, a position that benefits if the index holds steady or rises, and at 2 p.m. a buyer takes 6,500 March 835-strike calls worth more than $8 million, a trade that needs a 14% rally to pay off.

Sentiment changes after the close. Just after 4 p.m., a trader buys 15,000 Jan. 15 680-strike puts for $16 million while selling the same number of Oct. 16 760-strike calls for $4 million, creating a strongly bearish position with a total premium of $20 million and the day's highest-premium trade.

Don Kaufman, co-founder of TheoTrade and a former ThinkOrSwim Trader Group director, says neither the bond market nor the OpenAI revenue report causes significant damage on its own. He says the market can still fall, but a more lasting decline likely needs enough selling pressure to shift trading from absorbing weakness to accelerating it.

In our earlier article, we looked at how the U.S. bull market has been increasingly powered by AI-related spending and a narrow group of mega-cap technology stocks, keeping the S&P 500 near record highs. We also noted that elevated Treasury yields and tighter Fed policy raise valuation pressure, making the market more vulnerable if confidence in the AI theme weakens or leadership reverses.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.