“The Chart That Says AI Stocks Are Safe Again.” — watch on tastylive.
SpotGamma founder Brent Kochuba joined tastylive ahead of payrolls: AI stock options have reset from record dispersion, and shorting tech looks like the wrong side.
Nobody Bought Puts at the Lows
Two sessions ago, the S&P traded near 7,600 yet put demand never showed up as implied volatility remained sleepy. While AI stock options and index options both stopped pricing downside anxiety, software names along with crypto and Dell ripped higher. Traders found reasons to express upside.
Brent then pointed at the breadth behind the move up yesterday: every Mag 7 name traded higher on the session, software came rebid, and Google shipped new AI models. He argued tech can act as a safe haven while the cash flows hold up. Even for traders who do not want to chase upside, Brent claimed “this is not the price action you want to short.”
What S&P Dispersion Shows
Brent pulled up the CBOE dispersion index, DSPX, which measures single-stock implied vol against S&P 500 implied vol. It ran to a record high into May, when the crowd chased AI names hand over fist.
That same month, a major unwind followed which ultimately broke the dispersion trade, and the index fell back hard. However, price action in the semis held steady through that drop. Implied volatility came down, yet the stocks did not. Brent reads that as a far healthier options complex than the one traders faced in May, when traders were engaged in the “widowmaker” trade: selling calls in the hottest AI names amidst high realized volatility.
Financing Upside, Not Paying For It
Ahead of earnings, volatility can look high for a reason. Longer-dated exposure before key prints often cost minimal to carry. In SpaceX for example, the 125 strike put could be sold to buy the 200 strike call in the 500-day cycle for a credit, effectively minimizing risk in the middle of the structure. If the stock rallies hard, implied vol would likely lift with it, so the long call gains double.
Oil Runs, Equities Shrug, Rates Decide
Crude leapt from 80 to 92 in the past week, and equities never truly seemed to react. The oil situation remains opaque given the current conflict in the Middle East, with $100 as the level where gasoline could be impacted and demand starts to matter. This also makes rates critical to monitor: if yields climb alongside crude, that combination turns an equity shrug into something bigger.
What Would Confirm the Read, and What Could Break It
Brent reiterated that his conviction remains short-dated. Payrolls usually passes as a non-event, a three-day weekend pulls traders into selling vol, and the next real hurdle sits at CPI the following Wednesday. That leaves roughly three or four sessions in the short-dated sandbox. Beyond that, the options market becomes more challenging to read given the pending event uncertainty.
At the moment, Brent’s read seems to hold while semi and memory volatility stays contained and prices grind higher, with call premium growing into strength rather than the whole complex repricing. Brent’s view would break, however, if dispersion expands again, or if rates push higher with crude toward $100 and equities finally respond.
Brent Kochuba founded SpotGamma and contributes to tastylive. He was previously a portfolio manager at Seven North Capital Management, building options-based strategies, and a derivatives broker at Wolverine Execution, Credit Suisse and Bank of America.
Watch the full segment on tastylive: The Chart That Says AI Stocks Are Safe Again.