The US Stock Options Market Sends Strongest Bullish Signal in Four Years, FOMO Sentiment Could Be the New Catalyst for Growth

August 10th. The U.S. stock options market has recently shown extreme bullish signals, with investors' FOMO sentiment heating up and becoming a key driver pushing the market higher.

Data shows that the S&P 500 Index rose by 5.8% over the four trading days before August 4th, following nearly three months of narrow trading range where the price fluctuation was only 5.7%, far below the historical average. With the easing of the Middle East situation, a drop in oil prices, and strong corporate earnings performance, funds are flowing back into the U.S. stock market.

Reuters cited Trade Alert data showing that the ratio of daily average trading volume between S&P 500 Index call options and put options rose to 0.9, reaching the highest level in at least four years. Data from Susquehanna Financial Group shows that the indicator measuring the skewness of short-term S&P 500 call options has recently reached a two-year high, indicating that investors are paying a higher premium to bet on a rapid market rise.

Mark Hackett, Chief Market Strategist at Nationwide, stated that the buy-the-dip strategy once again paid off, as FOMO sentiment is at play. He pointed out that the core logic of the bearish market has weakened, and investors are unwilling to take the risk of missing out on a rally.

Steve Sosnick, Chief Strategist at Interactive Brokers, said that FOMO has not disappeared; it just hasn't been the market's main theme before. He mentioned that many institutional investors are more concerned about missing out on an upside opportunity compared to a market downturn, hence they are hedging risks by buying call options.

However, some analysts have warned that the extreme options demand may also amplify market volatility. Garrett DeSimone, Director of Research at OptionMetrics, pointed out that the surge in call options demand could drive both the VIX and the stock market higher simultaneously, reflecting that some of the market movement is driven by options trading technical factors.

Currently, the bullish trend in the U.S. stock market is still supported by strong economic data, corporate earnings, and the AI investment frenzy. However, with the market trading at high levels, extreme optimism has also led some investors to start paying attention to potential pullback risks.