This has been one of the craziest stock markets on record in recent times, but you wouldn’t have known it by watching the Cboe Volatility Index. Friday’s selloff made things much clearer.
The uninterrupted two-month 80% rally in semiconductor stocks, which added about half a trillion dollars in market capitalization to the market. Nasdaq100spurred one of the most successful ETF launches in history and spawned dozens of stunning unique and parabolic stock moves, finally hit a wall Friday as the VanEck Semiconductor ETF (SMH) fell almost 10% at its lowest.
The VIX, which had just touched its lowest level since January on Thursday, recorded its largest one-day increase since March. S&P500 Index options trading hit a record 7.8 million contracts at Cboe on Friday, 16% higher than the previous record set in April.
For many, the selloff is a harbinger of speculative excess in the face of trillions of dollars of upcoming IPOs and the potential for rising interest rates. For options traders who have been watching the roller coaster ride in individual stocks, this looks more like a long-awaited catch-up by the broader index.
Stock chart iconStock chart icon
The Cboe Volatility Index over the last five trading days
At the start of the week, a handful of key volatility indicators were at extremes. The gap between a single stock’s volatility and the broader index reached the widest since Cboe started tracking the dataand the one-month implied correlation between the top 50 stocks and the index hit its lowest level in a year.
It was the VIX sliding below its long-term average that seemed most out of place.
“Everything is back in sync,” Brent Kochuba, founder of options analysis platform SpotGamma, said on a call. “The calls were so full of things like Micron where the premiums were higher than SPY And QQQ combined, these things had to go. The VIX is up but not crazy.”
The bond market was far from being ballast. THE Cash flow at 10 years fell 40 basis points after Friday’s jobs data came out strong, and options traders flooded the market with bearish bets. iShares 20+ Year Treasury Bond ETF (TLT) as well as in corporate bond funds iShares iBoxx Investment Grade Corporate Bond ETF (LQD) And iShares iBoxx High Yield Corporate Bond ETF (HYG)where the calls are outnumbered more than 8 to 1.
Higher yields could have added additional difficulties to cryptocurrency trading. Bitcoin managed to hold $60,000 after a brief trip below this thresholdbut that of Michael Saylor Strategy fell nearly 7% as options traders bought more than twice as many puts as calls.
Add it all up and you get the worst day for the Nasdaq since April 2025.
“It didn’t take much to go down,” said Danny Kirsch, head of options at Piper Sandler. “There are huge assets in leveraged ETFs, particularly tied to semis, and giant hyperscalers Meta and Alphabet are issuing shares ahead of a huge IPO… not great, Bob.”