Call option volumes for US mega-caps explode higher

In a new note, Deutsche Bank points out the upward spike in call option volumes for US mega-cap growth and tech stocks, and how they have exploded in recent weeks.

Yahoo Finance's Julie Hyman breaks down the net call volume in Deutsche Bank's latest chart, weighed against the rest of the S&P 500 (^GSPC).

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Nicholas Jacobino

Video transcript

Deutsche Bank out with a chart looking at call volume in net mega cap growth plus tech compared to the rest of the S and P 500.

Yahoo Finance is very own.

Julie Hyman joins me now with a closer look.

Yeah, Deutsche Bank yesterday put out, uh, charts that make you go Wow, I believe how they titled it.

And this was one of the charts.

They highlighted Jim Reid of Deutsche Bank highlighting it in his daily note here.

So this looks at call volume.

So that is options to buy a stock, basically directionally a bet that the stock is going to be going higher.

And so with this measures here is in the purple line.

It's called options on Mega Cap Growth and tech.

And then if you take everything else out, if you take that out, this is the rest of the S and P 500 here in blue and we go all the way back to 2019 and frequently they've tracked pretty closely together.

But here we see a big divergence with that, uh, mega cap growth and tech really popping up here a lot of, uh, call option volume, whereas for the rest of the S and P 500.

It is sort of languished here now.

How would you read that?

Well, obviously, it's a big bet on those stocks going higher.

But in addition to that, it's what Steve Sosnick earlier in our conversation with him from interactive brokers said could be read as a so called blow off top.

And that seems to be how the folks at Deutsche Bank are reading it.

They say market positioning is stretched, so maybe do for a breather.

As a result of this, there is a couple of other things that they're pointing to here.

They say there is a buy out blackout period that happens for companies.

So we talk all the time about companies doing buy buy backs, I should say, but there are certain periods of time when they're not allowed to do them ahead of earnings or other news.

And so where basically 80% of the S and P 500 will be in that blackout period in coming weeks, so you won't have a support for some of these companies that have been buying back their own shares.

And also this positioning is in the 95th percentile.

So you tend to get a reversion to the mean here.

So that may be points to a pause in upward momentum.

Josh.

All right.

Julie Hyman.

Thank you.