"After advancing for five consecutive months, the Nasdaq 100 Index has risen each day but one in September as investors bet on optimism around artificial intelligence and Federal Reserve interest-rate cuts to keep technology stocks moving higher. A gauge of expected volatility in the index hasn't budged in months. And on Wednesday, infrastructure software giant Oracle Inc. made history with a 36% pop, its biggest gain since 1992. That's pushed some investors to bid up put options to protect this year's gains."
"The price of hedging against a 10% drop in the Invesco QQQ Trust ETF, the largest exchange-traded fund tracking the Nasdaq 100, over the next month is at the highest since 2022 relative to the cost of protection against a similar rally. The market is at highs, volatility is at lows, I think there are a lot of easy arguments to make as to why you should hedge,"
The Nasdaq 100 has climbed for months and nearly every day in September as AI optimism and expectations of Federal Reserve rate cuts drive tech gains. Implied volatility measures have remained low despite the rally. Oracle’s 36% surge amplified concerns, leading investors to increase demand for put options to protect gains. Hedging costs for a one-month 10% drop in QQQ are the highest versus protection for rallies since 2022. Put-to-call skew on QQQ is unusually elevated, reflecting growing investor unease ahead of market-moving events such as the Fed’s interest-rate decision on Sept. 17.
Read at www.mercurynews.com
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