Options Measures Extreme Optimism on Technology Stocks to Come Off


Options measures have lately shown the highest positivity on technology stocks. Nonetheless, it is said to fall off soon, a signal to RBC Capital Markets that it may merit exhibiting a few supports.

Skew, known to determine the price of bearish options as opposed to bullish ones, had reached lows on stocks, similar to Tesla Inc. and Facebook Inc. This displayed a general demand for upside and robust hypothetical fervor as investors bet on more significant profits. But it’s reversing now, as per Amy Wu Silverman, RBC Capital Markets derivatives strategist.

Wu Silverman wrote in a note that, “Short term antsiness is starting to play out in some of the market’s most beloved names. We are seeing pickups in skew in FANGMAN stocks where call exuberance reigned supreme all summer.” She shared this while utilizing an abbreviation to indicate the most noteworthy large-cap stocks, for example, Microsoft Corp and Amazon.com Inc. She further added, “The most common question I receive from portfolio managers is – how do I hedge my winners?”

As the S&P 500 drops impulse close to its February record high, one could see this unstiffening in the bullish lead. According to a chief market strategist at Miller Tabak + Co, Matt Maley, the mega-caps have “acted so well for such a long time that they could be due for a breather.”

Wu Silverman recommends, “With one- and two-month skew picking up in mega-cap Tech, and consider put spreads to hedge winners heading into fall.” Also, on a more drawn out term, she requests that the financial specialists to trade involving selling a call and getting a put. She says, “Call skew premiums are still hefty versus S&P through January 2021. Use zero-cost collars to take advantage of this landscape.”