SK Hynix's Nasdaq Debut Sends Options Traders Piling Onto DRAM ETF
$SK hynix(SKHY)$ 's trading debut on the Nasdaq has bolstered the appeal of $Roundhill Memory ETF(DRAM)$ to retail investors, strengthening the case for using options as insurance to protect their gains from a 121% rally since the ETF started trading three months ago.
The American depositary receipts of the South Korean memory maker climbed 12.8% Friday to close at $168.01. A day earlier, DRAM attracted a net inflow of $437.08 million, according to data compiled by Bloomberg. That took the fund's total assets to $24.3 billion, soaring from just $272 million when it first listed on April 2.
Open interest, or the tally of outstanding options contracts soared to 1.94 million, from 27,770 contracts three months ago, exchange data tracked by moomoo showed. The surge reflects how quickly retail investors have embraced DRAM options after the ETF price more than doubled since its April launch.
$Micron Technology (MU.US)$'s bigger rival SK Hynix begins trading American depositary receipts under the ticker "SKHY" on Friday, a listing that was more than seven times oversubscribed. That catalyst ignited a frenzy in the Roundhill Memory ETF which tracks memory stocks like Micron, $Samsung Electronics (005930.KR)$ , and SK Hynix itself.
The put/call ratio, a gauge of bearish versus bullish bets that divides put volume by call volume, has climbed to 0.93 by Thursday, from 0.53 two months ago. A reading below 1 still signals more calls than puts, but the sharp rise shows traders are buying protection even as they chase upside.
At the same time, implied volatility, or IV, which measures how much the market expects a stock to swing and is priced into options, hit 104.65%. That ranks higher than 92% of readings since the ETF started trading three months ago. For context, historical volatility, the actual past price swings, came in at 118.65%. When both numbers are above 100%, it tells regular investors that traders expect massive moves and are paying top dollar for the chance to participate.
The options market is zeroing in on one date: July 10. The volatility term structure, which maps IV across different expiration dates, shows IV at about 175% for options expiring today, collapsing to about 95% by September, according to exchange data tracked. That steep drop-off, called backwardation, happens when traders expect an imminent event to move prices. That could be tied to investor excitement over SK Hynix's Nasdaq trading debut.
The volatility smile, which shows IV for different strike prices, confirms the panic. For July 10 expirations, IV spikes above 1,000% for deep out-of-the-money strikes. That means traders are paying lottery-ticket prices for options that only pay off if DRAM makes an extreme move today.
@TigerStars @CaptainTiger @TigerWire @Daily_Discussion @Tiger_chat @Tiger_comments @MillionaireTiger
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
