The S&P 500 just ripped 100 handles. Underneath the surface, the semi trade is breaking.
Intel’s implied volatility hit one of the highest readings on a 15-year chart while the stock keeps climbing.
That is not how healthy rallies behave.
AMD broke two times its expected move on earnings with zero vol crush. Volume hit 1.2 million option contracts on a name that usually trades 100,000 to 200,000.
When out-of-the-money calls get priced this high, retail eventually stops buying them. Demand collapses and the stock turns and implodes.
We are days away from that moment in semis. The same exact setup is showing up across Intel, AMD, and Micron.
In tonight’s video, I show you what is breaking under the surface:
- Intel’s 9-day option chain shows a hard inverted skew with at-the-money calls at 89 vol and out-of-the-money calls climbing higher
- Intel’s 165 calls 72 days out are pricing 85% implied volatility, and we are running out of strikes above that level
- AMD volatility barely moved post-earnings, dropping from 72 to 68 instead of getting crushed
- Micron’s 9-day skew is severely inverted on the same setup as Intel and AMD
- SPX is 20 handles outside its expected move with 45 minutes to go, and 7,340 is the critical level for the rest of the week
This rally is being held up by two or three names. Microsoft, Apple, Amazon, Meta, and Broadcom are all underperforming the Nasdaq today.
When the call buying in semis runs out of fuel, the unwind will not be subtle. Spread your risk and keep volatility risk under control before this trade breaks.
