The fall in oil prices fails to conceal anxiety in the options market, as US stocks hit new highs while long-term concerns persist.

Last week, the U.S. stock market hit a historical high, while energy futures prices fell slightly due to easing tensions in the Middle East. However, in some options markets, there are still signs of tension as investors prepare for potential geopolitical and macroeconomic turbulence. In the short term, stock investors are becoming more optimistic, with the premiums of put options decreasing. But in the long term, there is little change in market preference biases, indicating that optimistic sentiment may not be sustainable. Similarly, the long-term contract prices of the Chicago Board Options Exchange Volatility Index (VIX) remain high, indicating ongoing concerns and delays in the impact of tariffs on the economy. Rocky Fishman, founder of research firm Asym 500 LLC, wrote in a report on Friday, "The derivative markets have not fully recovered to February levels. This suggests that the volatility in April has a lasting impact, which is reasonable. The volatility index futures curve has steepened, putting the six-month range of the curve at levels rarely seen between 2023 and 2024." There were signs last week of investors buying VIX volatility index options, as the Chicago Board Options Exchange's VVIX index (which measures the "volatility of volatility") fell below 90, a level that has been low since July of last year. The oil market has also not fully recovered from the conflict between Israel and Iran, although attention has shifted back to economic and fundamental factors. Brent crude oil implied volatility has fallen to levels seen at the beginning of June, showing no strong bias towards bullish or bearish trends. However, bets on oil price volatility still carry a higher premium compared to stocks, as the rally in the S&P 500 index has put pressure on the options market. In a report last week, derivatives strategy experts, including Emma Wu from J.P. Morgan, suggested a mixed trading strategy involving stocks and oil. They stated that if tensions in the Middle East escalate again, oil prices may rise, while at the same time, due to prolonged high interest rates, stocks may fall. Although the correlation between these two asset classes has recently reached a high level, they emphasized that during times of geopolitical tension, this relationship often turns negative. The ever-changing international political situation has left many investors feeling uncertain. According to data from the European Intercontinental Exchange Futures, in the week ending on June 24, hedge funds and other large fund management institutions saw the largest drop in net long positions on Brent crude oil futures and options since early April, following the largest buildup of long positions in 11 weeks. And this is not just about oil. According to Bridgeton Research Group data, in the European natural gas market, the net short position of trend-following commodity trading advisors (CTAs) rose from 9% to 18% on Tuesday of last week (while the net long position fell from 11% to 9%). These algorithms often exacerbate market volatility, making it more difficult for traders with physical assets to operate in the market. One area that has attracted unprecedented interest from investors is the futures spread trading of crude oil. This month, the open interest in related options reached a historical high. In a rare scenario, traders believe that the short-term supply tightness may turn into oversupply as OPEC and other oil-producing countries release more oil into the market, while uncertain economic prospects may dampen demand. This "hockey stick" curve (disappeared due to attacks from Israel and Iran) has now returned to the level three weeks ago. Analysts Yulia Zhestkova Grigsby and Daan Struyven from Goldman Sachs wrote in a report, "The significant decrease in geopolitical risk premiums may reflect traders' recent experiences of dealing with major geopolitical shocks without significant oil supply disruptions, Iran's restrained response, the strong desire of the U.S. and China to avoid major supply disruptions, and a potential shift from significant inventory reductions since autumn to significant inventory increases."