Retail Investors Fuel AI Super Rally: Call Buying Surges
Retail investors are showing extreme bullishness, evidenced by a surge in call option purchases on 'Mag 10' stocks, marking the most aggressive buying pattern since the 2021 trading frenzy. Cboe data revealed that 52% of new positions opened were call buys, indicating strong speculative appetite. This optimism contrasts with recent caution due to geopolitical concerns. Furthermore, the Nasdaq-100's CallDex Index hit a 52-week high, and the index itself recorded a new record, with year-to-date gains surpassing 16%, driven partly by the semiconductor sector.
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Retail investors are exhibiting the most aggressive bullish sentiment since the peak trading frenzy during the COVID-19 stimulus era, according to recent market data.
Surge in Call Option Buying for 'Mag 10' Stocks
Data from the Chicago Board Options Exchange (Cboe) indicates a significant surge in retail activity. Retail traders have been aggressively purchasing call options on the 'Mag 10' stocks—which include the original seven mega-cap names plus AMD, Palantir, and Broadcom.
Buying Trend: The rate of call buying has reached the heaviest 10-day clip since 2021.
Position Breakdown: Of all new positions opened, 52% were call purchases, while 17% involved call selling.
Mandy Xu, head of derivatives market intelligence at Cboe, noted that this suggests that "Hedgers have thrown in the towel," observing a consistent theme of retail participants attempting to capitalize on the market rally by buying calls.
Shift in Market Sentiment
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This current wave of optimism represents a notable reversal from the preceding month. Just a month prior, Cboe's call-buying metric was significantly lower, as investor focus was diverted toward geopolitical concerns and crude oil price fluctuations.
Indicators of Speculative Appetite
The heightened bullishness is corroborated by other market indicators, pointing toward strong speculative interest, particularly within the technology sector.
Nasdaq-100 CallDex: The 30-day CallDex Index for the Nasdaq-100 index is at a 52-week high and approaching a three-year record, according to Nations Indexes.
Covered Call Activity: Scott Nations, president of Nations Indexes, highlighted that the lack of interest in selling covered calls signals an "entirely different level of bullishness."
Broader Market Performance
The underlying market strength supports this retail enthusiasm. The Nasdaq-100 index set a new record on Monday, achieving a year-to-date gain exceeding 16%. This performance is partly fueled by semiconductors, which are continuing a strong run and now account for nearly 20% of the S&P 500's total market capitalization.
