Chip rebound sparks hedging flurry from traders

When it comes to chipmakers, traders are ordering à la carte and shorting the buffet. Put volume more than doubled that of calls Monday morning in the VanEck Semiconductor ETF (SMH) , with more than half of total premiums tied to puts. Of that, more than 10% of the $217 million in premium exchanging hands did so in the 550-puts expiring Aug. 21. That level represents a 7% drop from current levels, showing traders are skeptical of the chip ETF's Monday bounce of more than 5%. Despite the overall bearish sentiment on the group, traders placed several bullish bets on potential winners. For example, in Marvell Technology , calls outnumbered puts three to one, and more than 80% of premiums. The action follows the S&P Dow Jones Indices announcing the chipmaker will be included in the S&P 500 on June 22. Call buyers in Marvell were largely targeting the $300 level in the stock across June, July and September expirations. Those at-the-money bets are not cheap to make. Thirty-day implied volatility in Marvell is in the 98th percentile, meaning premiums are highly elevated thanks to the stock's recent rip higher. "Even for a volatile index like the [ PHLX Semiconductor Index ], the last two weeks have been pretty crazy," said Bespoke co-founder Paul Hickey. "And after the moves we've had to both the upside and now the downside, I wouldn't expect it to immediately sell down. Prepare for more pre-July 4th fireworks!" Headline fever is also lighting Intel' s fuse, as Alphabet reportedly commissioned the company to make 3 million in-house AI chips. Options volume in Intel was trending for nearly twice its daily average Monday morning, and more than 70% of that volume was tied to calls. Nearly three times more calls were bought at or above ask, with more than 60% of those calls being more than 5% out of the money. Cerebras joined in on the frenzy, too. The newcomer had more than $50 million in premiums change hands, overwhelmingly tied to calls. All of the top 10 most popular contracts by dollar amount were calls, of which more than 60% were greater than 5% out of the money.