Nasdaq 100 logs top 10 bullish options stat as bears capitulate

The Nasdaq 100 jumped 3.3% to 29,733 Tuesday, pushing the tech-heavy gauge within 3 percent of its June 3 record after a more than 10 percent intraday decline through last Wednesday.

"Pessimists threw in the towel and optimism was running amok today," Scott Nations, president of index options analytics service Nations Indexes, said. "It's absolutely fair to say this was one of the ten most bullish days for Nasdaq 100 over the past 10 years."

The price of one-standard-deviation out-of-the-money QQQ calls — bullish bets with a 16 percent implied chance of success — rose 42 percent Tuesday, the biggest single-day change in five years and the ninth-largest in a decade, according to Nations Indexes. The same metric for SPDR S&P 500 Trust options posted its seventh-biggest jump in three years, and call buying was so heavy that the Cboe Volatility Index rose alongside stocks, a pattern that occurs about 20 percent of the time, data compiled by CNBC and Convex Asset Management show.

The rally came as S&P 500 earnings are on pace to grow 47 percent in the second quarter, the fastest since the 2021 rebound from Covid, according to FactSet, while the forward 12-month price-to-earnings ratio of 19.6 sits below the five-year average. Treasury yields fell, crude slipped below $80 after President Trump suggested a deal with Iran was nearing, and gains spread beyond megacap tech.

Options Volumes Point to Renewed Participation

Nasdaq 100 options volumes are tracking 18 percent above July's pace this month, exchange data show. "Heightened investor participation as markets regain momentum following strong earnings and post-FOMC stabilization," Kevin Davitt, research and strategy at Nasdaq, said in an email.

Breadth Widens Beyond Megacap Tech

The gains were supplemented by a 2 percent rally in materials and industrial stocks. The Invesco Equal-Weight S&P 500 ETF added 1.4 percent, bringing its year-to-date gain to 14 percent, edging out the S&P 500's 13 percent advance.

Stocks began stabilizing last week after news that hedge fund manager Leopold Aschenbrenner's Situational Awareness had been in the midst of forced selling of billions of dollars of popular AI names. With that overhang easing, the 10-year Treasury yield stopping short of last year's highs, and second-quarter earnings growth running at the fastest pace in four years, traders pointed to the combination as the trigger for Tuesday's short squeeze and call-buying burst.

This article is for informational purposes only and does not constitute investment advice.