By Saqib Iqbal Ahmed
NEW YORK, Sept 14 (Reuters) – Some traders took advantage of Tuesday's massive selloff in the U.S. stock market to go bottom fishing in stocks and options in hopes of picking up cheap upside bets on a quick market rebound.
With S&P 500 dropping 4.3% on Tuesday, the Cboe Volatility Index – the so-called Wall Street "fear gauge" – jumped to a two-month high, as traders lapped up defensive put options, pointing to heightened fear of the stock market revisiting its mid-June lows.
Others, however, decided to pick up dimes in front of the proverbial bulldozer as markets sold off, though expectations of a more aggressive Federal Reserve have dampened hopes of a significant market rebound anytime soon.
For the S&P 500 Index-tracking SPDR S&P 500 ETF Trust , six of the top 20 most actively traded contracts on Tuesday were call options, according to Trade Alert data.
These ranged from calls betting on the SPY shares rebounding to $380 to those looking for a move up to $405 by the end of Wednesday's session. On Wednesday, with SPY shares about flat on the day at around $393, the trend continued with 0.7 SPY calls traded for every put.
More broadly, a pick up in implied volatility – an options market measure of the expected move in prices – for calls in SPY and the Nasdaq-100 Index-tracking Invesco QQQ Trust, pointed to some traders starting to initiate bullish trades, said Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald.
"With the market down 4% they were probably looking for some upside … so you have probably retail (traders) coming in and lifting some of those upside calls," Tym said.
The sudden drop in the market may have also forced options dealers to snap up call options as a way to balance the increased risk to their own books, he said
Betting on a quick rebound was not restricted to the options market, with retail investors buying $2 billion worth of U.S.-listed securities, the second largest day of retail net flows this year, according to Vanda Research.
"However, this strong showing by mom-and-pop traders failed to support broad indices as selling pressure from professional investors was overwhelming," the firm's analysts wrote.
Meanwhile, SPY & NASDAQ 100 index skew – an options market measure of the relative demand for puts versus calls – remains muted, suggesting little fear of an extreme drop in the market, according to Christopher Jacobson, a strategist at Susquehanna Financial Group.
While the recent sharp selloff and continued risks posed by inflation may suggest skew should be more elevated, the fact that the market has sold off in fits and starts, rather than all at once, may be helping keep fear of a stock market crash muted, Jacobson said in a note. (Reporting by Saqib Iqbal Ahmed; Editing by Josie Kao)
Shares of electric vehicle (EV) manufacturer Rivian (NASDAQ: RIVN) sank in Friday morning trading. At that time, the tech-heavy Nasdaq Composite was down by 2.3%. A number of factors were working against Rivian's shares.
Nio (NYSE: NIO) stock has tanked more than 40% in the last month, far outpacing the approximately 14% decline in the S&P 500 index. Nio shares continue to slide today, down 2.5% as of 11:25 a.m. ET. Nio doesn't yet do business in the U.S., but the prospect for the Federal Reserve to have to raise rates even more than hoped has global implications.
The U.S. stock market took an unusual swing after Thursday’s inflation report. “Shortly after the open, the S&P 500 index had dropped nearly 4% from its pre-market highs before staging an epic rally of over 5%,” Bespoke Investment Group said in a note Friday. “Even in this ‘all or nothing’ type of market environment, reversals of that magnitude are rare.”
In this article, we will take a look at the 10 stocks to sell according to billionaire Dan Loeb. To skip our analysis of Dan Loeb’s profile, investment strategy, and 13F holdings, you can go directly to see the 5 Stocks to Sell According to Billionaire Dan Loeb. Daniel Seth Loeb is the CEO and […]
Inflation and higher interest rates could be here to stay. BofA says changing demographics, deglobalization, and underinvestment in energy production have created a new “regime” for the global economy.
The stock market took it literally on Thursday with a massive rally following an inflation reading that everyone agreed was way too hot. The CPI rose 0.4% in September, up from 0.1% in August, and above estimates for 0.2%. Core consumer prices, which don’t include food and energy, rose 0.6%, above forecasts for 0.4%, and unchanged from August.
The telecommunications company has invested billions in 5G technology, becoming one of only three companies providing the service in the U.S. Still, there is more to consider to determine if Verizon (NYSE: VZ) stock is a buy right now.
Devon Energy (DVN) has received quite a bit of attention from Zacks.com users lately. Therefore, it is wise to be aware of the facts that can impact the stock's prospects.
A look at the shareholders of Advanced Micro Devices, Inc. ( NASDAQ:AMD ) can tell us which group is most powerful. The…
Block (NYSE: SQ), the well-known fintech innovator headed by tech genius Jack Dorsey, has experienced a slowdown in recent quarters. Where could Block be five years from now, and is the stock a buy today? Block has come a long way from selling those little white squares that small merchants plugged into their smartphones to accept card payments.
The fact that multiple The Charles Schwab Corporation ( NYSE:SCHW ) insiders offloaded a considerable amount of shares…
United Airlines Holdings (NASDAQ: UAL) is reportedly closing in on a massive order for new jets. Boeing (NYSE: BA), one of two companies that could benefit from the order, is flying high as a result, with shares up as much as 3% in Friday morning trading. Boeing shares by and large have been in a holding pattern for some time.
If you want to know who really controls Medical Properties Trust, Inc. ( NYSE:MPW ), then you'll have to look at the…
Everyone is hoping the market might be bottoming and by the recent actions of Bank of America clients, some evidently think the lows must be in sight. Last week, BofA customers splashed out $6.1 billion on US stocks, in what amounted to the third largest inflow since 2008. While the bank has stated it is not as confident the bottom is quite so close, it’s not hard to see why investors feel the time is right to lean into equities. The widespread losses have left scores of beaten-down stocks looki
Yahoo Finance Live anchor Seana Smith breaks down the release of Amazon’s ‘Prime Early Access Sale’ results.
To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is…
A cryptic one-word response to a week-old tweet has investors hoping he’ll greenlight returning $10 billion to shareholders—and it could help him buy Twitter to boot.
While Northrop Grumman Corporation ( NYSE:NOC ) shareholders have enjoyed a good week with stock up 3.3%, they need…
A 2-year Treasury note now pays 4.3% (as of Oct. 12), a level that could induce some investors to choose bonds instead of stocks. Due to falling stock prices, AT&T's dividend returns significantly exceed that level. The question for income investors is whether they should take the guaranteed return of the bond or buy AT&T.
Dividends are the bread and butter of income investors. You don't need to sell your assets or spend hours every day managing your accounts. Instead, dividend stocks simply generate income on their own. Putting together a portfolio that generates at least … Continue reading → The post How to Make $1,000 a Month in Dividends appeared first on SmartAsset Blog.
By Saqib Iqbal Ahmed