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LivestreamMenuA trader works on the trading floor of the New York Stock Exchange in New York, the United States, on Aug. 11, 2026. U.S. stocks ended lower on Tuesday.Liu Yanan | Xinhua News Agency | Getty Images
It’s been a wild summer for stocks, even if it may not feel like it at surface level: the S&P 500 is back at an all-time high, and volatility measured by the Cboe VIX Index is near year-to-date lows. Small-caps are the quietest relative to big-caps in at least a year.
What the calm doesn’t reflect is what it took to get here: extraordinary swings in single stocks, a record spread between S&P and Nasdaq 100 volatility, and a 25% pullback in the semiconductor group that had traders rushing to buy more puts than at any point in the history of the VanEck Semiconductor ETF (SMH).
Despite the rout in high-flying memory stocks, the VIX stayed well under first-quarter lows and selling in the S&P 500 was contained to momentary spasms. As the market firmed up and broke out coming into August, the extreme positioning flipped to the other end of the spectrum as Nasdaq options logged one of the most bullish days in ten years and Cboe set a record for call-option trading.
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Cboe Vix Index, YTD
The net result today is the most bullish positioning in S&P call options relative to puts in at least a year across options tenors from one month to one year expiry, according to a Cboe report published Monday. The ratio of puts to calls with a 25% chane of expiring in-the-money in the next month is the lowest since mid-2024 as of Monday, the report shows.
“People weren’t prepared for this sharp of a rally post-earnings the past few weeks,” Mandy Xu, head of derivatives market intelligence at Cboe Global Markets, said in an interview. “There’s definitely been a squeeze higher which is why we’re seeing the demand for upside.”
There’s one key caveat: traders are also hanging onto deep out-of-the-money puts in case things go wrong in a hurry. The ratio of 10-delta puts – options with roughly a 10% chance of expiring in-the-money – to 25-delta puts is in the 66th percentile high of the past five years, according to Cboe, meaning the low-probability options are in unusually high demand.
It’s the stock-market version of `trust but verify’ – using cheap crash-protection puts.
“The typical portfolio hedges have been sold, but the really far out-of-the-money crash protection is still fairly elevated,” said Xu. “If you’re looking for signs people are worried about a sharp move lower, it’s the tail hedges.”
Traders also see small-caps a sort of volatility safe-haven, the data suggest.
After a 20% rally year-to-date that’s ahead of both the S&P 500 and the Nasdaq 100, Russell 2000 volatility declined the most among the benchmark indexes last week to below 17, a 2nd percentile low in the past five years, according to Cboe.
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