- Options traders are turning cautious on the Magnificent 7 tech stocks, driving up protection costs as the Bloomberg Magnificent 7 Index drops 6.5% in 2025 after tripling over two years, outpacing the S&P 500’s (^GSPC) 58% gain, amid concerns over U.S. AI dominance and economic uncertainty.
- Volatility is rising across the group, with Apple’s (AAPL) three-month implied volatility at a September high, Nvidia (NVDA) facing bearish options buildup between $115 and $130 strikes, and Tesla (TSLA) showing a bearish tilt, reversing the call-heavy skews that defined the post-pandemic tech rally, per Bloomberg.
- Economic data this week – factory activity, service-sector figures, and nonfarm payrolls – alongside potential tariffs and a risk-off rates market (Treasury yields nearing 4% for shorter terms, 4.2% for 10-year) are amplifying market jitters, with the VIX-S&P 500 volatility spread hitting a December peak, as reported by Bloomberg.
Options traders are displaying growing caution toward the Magnificent 7 tech giants, a stark shift from the relentless bullishness that fueled their dominance over the past two years, as reported by Bloomberg. The Bloomberg Mag 7 Index, which soared over threefold since 2023 compared to the S&P 500’s (^GSPC) 58% gain, has slumped 6.5% in 2025, prompting investors to snap up protective puts amid doubts about U.S. AI leadership and economic resilience. Joe Mazzola, head trading and derivatives strategist at Charles Schwab Corp. (SCHW), noted that the same stocks that rewarded investors handsomely are now faltering, with options costs surging—Apple’s (AAPL) three-month implied volatility hitting its highest since September and its skew the steepest since August, a period marked by yen carry trade turmoil.
This unease is palpable across the Mag 7, with Nvidia (NVDA) seeing a pileup of bearish options between $115 and $130 strike prices, per Nomura, potentially amplifying price swings as dealers adjust their negative gamma positions. Historically, the post-pandemic tech rally flipped typical options dynamics – call premiums outstripped puts as confidence soared – but Mazzola highlighted to B’berg that skews, once heavily call-sided, have normalized as demand for downside protection grows, evidenced by Tesla’s (TSLA) options tilting bearish despite its post-election surge tied to Elon Musk’s White House ties. Volatility is climbing across the board, with the call-to-put ratio dropping to a September low on Thursday and the VIX-S&P 500 realized volatility spread hitting a December peak, a trend Rocky Fishman of Asym 500 called “especially expensive” for implied volatility, per Bloomberg’s analysis.
Economic uncertainty and potential tariffs are fueling this shift, with traders eyeing key data – factory activity on Monday, service-sector figures on Wednesday, and Friday’s nonfarm payrolls – to gauge the Federal Reserve’s next moves, while the rates market reflects a risk-off stance as two-, three-, and five-year Treasury yields near 4% and 10-year yields dip to 4.2% after benign inflation data. The tech unwind persists despite a late-January recovery from the DeepSeek AI selloff, and broader market jitters surfaced around Feb. 18 when institutional investors began hedging against a VIX spike. Options protection is pricier now, reflecting a market grappling with a fading tech narrative and macroeconomic headwinds, a far cry from the Mag 7’s once-unassailable run.
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