Semiconductor ETF (SMH.US) drops more than 10% from its high point. The volume of put options exceeds call options by 5 times. Bearish sentiment spreads to the Nasdaq.

Discover, the trading targets that investors were previously flocking to have now become collective short-selling targets, even as stock prices continue to fall. On Tuesday, components of the VanEck Semiconductor ETF (SMH.US) were generally declining. The ETF has currently fallen over 10% from its all-time high set last week, and options traders are betting that the decline will further intensify. According to ThinkOrSwim data, as of Tuesday midday, the trading volume of put options was four times that of call options, with the amount of put options bought by traders being over five times that of call options. SpotGamma data shows that out of the nearly $350 million options premium traded on SMH that day, $260 million was for put options. For investors who were heavily positioned in AI hardware stocks, this price trend could be seen as a brutal reversal. For options traders who have been bearish recently, the continued influx of put buying amidst the sharp decline is sending a signal: some of the previously bullish funds in the industry are now shifting to other tracks. Co-founder of TheoTrade, Don Kaufman, stated in a phone interview: "Friday's sell-off will definitely not be a one-off event. These buyers of SMH put options will force market makers to short sell stocks or sell Nasdaq futures, forming a feedback loop very similar to what we saw during the uptrend, and when fund managers or retail investors panic, the decline could be further amplified." The bearish sentiment surrounding SMH has also spread to the tech-heavy Nasdaq 100 index, with options trading for the Invesco QQQ Trust ETF also leaning towards put options. Out of the $3.7 billion options premium traded on QQQ on Tuesday, around $2.5 billion was for put options. In terms of trading volume and amount, the most popular contract currently for QQQ is the put option with an in-the-money strike price of 700 expiring on Tuesday, corresponding to a premium of $44 million; followed by the put option with a strike price of 715 expiring next Monday, with a trading amount of $35 million as of writing. As the market deteriorated on Tuesday, even the Roundhill Memory ETF (DRAM.US), which previously had more stable bullish sentiment and more balanced overall trading volume, began to shift towards pessimism. Traders bought over 24,000 put options in the ETF, while the number of call options bought was less than 15,000.