U.S. Stocks Keep Hitting New Highs as Options Market Call Buying Surges to Near-Decade Peak
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The S&P 500 has rallied roughly 23% since late March, and call-option demand has surged to its highest since 2016 — institutions unwilling to chase stocks at stretched valuations are using options to lock in upside, a shift from hedging downside to insuring against missing the rally.
How high has call-option demand actually climbed?
Citadel Securities data show at least 170 S&P 500 stocks have call-option demand — relative to at-the-money options — at the highest level since 2016.
Scott Rubner, head of equity and equity-derivatives strategy at Citadel Securities, wrote in a client note: "Upside demand has accelerated toward record levels."
This means → the market's dominant spending has flipped from buying insurance against drops to buying lottery tickets on further gains — a structural reversal in directional positioning.
Why are institutions buying calls instead of just buying stock?
Interactive Brokers chief strategist Steve Sosnick calls the phenomenon "FOMO insurance" — fear-of-missing-out insurance.
In plain terms = some institutions think valuations are stretched and momentum is overextended, so chasing stocks feels risky. But they also don't want to miss the rally. Call options solve both problems: if the market rises, they profit; if it falls, the most they lose is the premium.
This reflects a split mindset: logic says "expensive," emotion says "it could keep going." Call options are the instrument that lets you hold both views at once.
Is there fundamental support behind this call-buying wave?
Christopher Jacobson, co-head of derivatives strategy at Susquehanna International Group, argues the bidding-up of calls is backed by actual price movement, not pure speculation.
On the macro side, U.S. companies just posted their strongest quarterly earnings growth since the post-pandemic rebound in 2021; strategist Ed Yardeni has raised his S&P 500 target.
The S&P 500 rose 0.7% Thursday to another record high, as falling oil prices and easing inflation led traders to scale back bets on Fed rate hikes.
Are there any contrarian signals?
Cboe data show implied volatility — the market's expectation for how much individual stocks will swing — has declined for the coming 30 days.
The VIX, a gauge of expected S&P 500 volatility over the next month, has dropped to its lowest since January; the equal-weight VIX index hit a low not seen since March 17.
This means → the cost of hedging against a downturn is currently very cheap — almost nobody is willing to pay for protection against a fall.
Is anyone actually buying protection?
On Thursday one institutional investor spent $23.4 million on a series of put options that would pay off massively if the S&P 500 drops 38% by December 18.
Sosnick offered a weather analogy: "If there's a drought, nobody really wants to buy an umbrella. But that might be the best time to buy one."
In plain terms = when everyone is betting on more upside, insurance gets cheapest — and someone is already stocking up on "umbrellas" while the sun is still out.
Content is for reference only, not financial advice.