New York Stock Market, VIX Surges Amid Call Option Frenzy... Will the 1990s Dot-com Bubble Disaster Be Repeated?

▲ U.S. stock market, bull market, Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Meta (META)/AI generated image

As the New York stock market sharply rebounded for four days, investors, fearing being left out of the bull market, rushed to buy call options. A self-reinforcing market emerged, where the chase for options once again pushed stock prices up.

According to MarketWatch on August 4 (local time), the S&P 500 rose 1.8%, marking its largest single-day gain since April 8. The Chicago Board Options Exchange Volatility Index (VIX), known as Wall Street's fear gauge, also increased by 2.9% to 16.47. This is an unusual trend where both stock prices and the volatility index rise simultaneously.

Following reports of a ceasefire between the U.S. and Iran, investors rushed to buy call options, betting on rising stock prices. Put option prices, which had been accumulated in anticipation of a decline, plummeted. Market makers who sold call options had to buy stocks and stock index futures to reduce their risk. This created a structure where option demand pushed up stock prices, and the rising stock prices, in turn, spurred further option purchases.

Charlie McElligott, a cross-asset strategist at Nomura, diagnosed that investors are “jumping back into the market through options.” As mega-cap tech stocks leading AI investments, such as Alphabet (GOOGL), Meta Platforms (META), Amazon (AMZN), and Microsoft (MSFT), rebounded, the sentiment of chasing gains intensified. Hedge funds' strategies of buying semiconductor stocks and selling mega-cap tech stocks have also reversed completely in the past month.

The Nasdaq Composite Index was poised to record a gain of over 1% for four consecutive days. Such a trend has occurred only 18 times in Nasdaq's history. Jordan Rizzuto, CIO of GammaRoad Capital Partners, warned that if the simultaneous rise in stock prices and VIX continues for several months, it could lead to “a long-term inflection point like the late 1990s or 2007.”

The S&P 500 broke its all-time closing high for the first time since early June. Its four-day gain was also the highest since April 2025. While the Dow Jones Industrial Average reached a new high, the Nasdaq Index did not fully recover its losses from the previous six weeks.

[Article Summary]

-The S&P 500 surged 1.8%, and the VIX also rose 2.9%, indicating a simultaneous increase in stock prices and volatility.

-Investors, fearing being left out of the bull market, purchased call options, which in turn stimulated further stock purchases.

-Experts warned that if this trend continues for an extended period, it could lead to a market inflection point similar to the late 1990s or 2007.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*