The selloff in U.S. stocks is driving record trade options on the Nasdaq 100 Index (NDX). Large tech company instability is battering the tech-heavy index.
Record trade options on the Nasdaq 100 Index (.NDX) are being driven by the selloff in U.S. stocks. The tech-heavy index is being pounded by instability at large tech giants. The index, which comprises around 70% IT businesses, has fallen 7% from its record high on July 10th, sending shockwaves through the megacap corporations that have driven markets higher this year. The S&P 500, on the other hand, has dropped 4% from its record, which was also established earlier this month.
Investors looking to manage their exposure to technology stocks have contributed to the increase in options trading on the index during the stock market’s decline. A study of Trade Alert data shows that the NDX’s one-month average daily options trading volume has reached its highest level ever, at 62,000 contracts per day. Even though QQQ options volume is still well below the level reached during the market selloff in October of last year, NDX options volume has soared to a record high. That being said, it is still far less than the 3.9 million contracts traded on average daily on the Invesco QQQ ETF, an ETF that tracks the Nasdaq 100 index.
Because NDX options are somewhat more expensive than derivatives on other indices, their popularity has tended to decline. Compared to QQQ contracts, trading options on the NDX require a much higher initial investment due to the index’s valuation, which is approximately four times that of the S&P 500. However, the fact that tech companies are at the core of the current market turbulence has increased the contracts’ attractiveness. “There’s no denying that the leading stocks in NDX are propelling the S&P 500,” stated Interactive Brokers head strategist Steve Sosnick.
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