TL;DRChip stocks bounced Monday after Friday’s $1.3 trillion rout, but put options on the semiconductor ETF have hit an all-time high. Traders are staying long and buying insurance.
Micron surged 10% on Monday after losing 13% on Friday. Marvell jumped 9% on news of its addition to the S&P 500.
The semiconductor sector bounced back from its worst single-day rout since 2020, when the Philadelphia Semiconductor Index fell roughly 10.3% and erased over $1.3 trillion in market value. But one corner of the options market suggests the rebound is being treated less as a recovery and more as a chance to buy protection before the next leg down.
Record put buying
Open interest in put contracts on the VanEck Semiconductor ETF (SMH) has surged over the past two months to just under 1.7 million, the most ever recorded, according to Bloomberg data going back to the fund’s 2011 launch. The volume indicates the puts are mostly being bought, not sold, meaning traders are paying for downside protection rather than betting on a collapse.
