U.S. stock options trading volume has reached a record high, raising concerns among analysts. Some analysts believe this rally is driven more by heightened trading activity than by genuine economic strength.
X index analysis firm Bull Theory stated that traders bought a record $2.6 trillion in S&P 500 call options in a single day, the highest level since tracking began in 1999.
It is worth noting that call options bet on the stock price continuing to rise. However, analysts say the more important question is how these trades themselves could further push up the market price.
When traders buy a large number of call options, market makers typically purchase the underlying stocks to hedge their risk. This additional buying further pushes prices higher, attracting more bullish traders and creating a positive upward cycle.
The bull market theory suggests that the current rally is driven more by trading mechanics than by corporate earnings or strong economic data.
Goldman Sachs traders detect signs of excessive speculation
This unusual market activity has also drawn the attention of Goldman Sachs traders, who reportedly described the market as being in a “semi-irrational chase mode.”
Analysts are also monitoring the Philadelphia Semiconductor Index. According to reports, the index's Relative Strength Index (RSI) has reached its highest level since 1999, the peak of the dot-com bubble.
Although analysts have not said that today’s market is identical to the dot-com bubble era, the similarity in momentum levels has made some investors uneasy.
The bull market theory warns that the greatest risk may emerge when traders begin to close their options positions or when contracts expire. If buying pressure fades, the market could reverse quickly.
Analysts have described this rally as "powered by jet fuel, not fundamentals," suggesting the market could struggle once the upward momentum slows.
Bitcoin rose in tandem with the stock market.
Meanwhile, the price of Bitcoin also rose, increasing 0.95% over the past 24 hours and trading near $80,384 as of this writing.
Analysts say Bitcoin’s movement appears to be more closely tied to the overall rise in the stock market than to specific crypto-related news. Data shows Bitcoin has a correlation of up to 71% with the S&P 500 index, indicating that both markets are responding similarly to current macroeconomic conditions.
At the same time, the broader cryptocurrency market also rose, with its total market capitalization increasing by 1.46%.
Despite the rise in Bitcoin's price, market speculation has actually cooled. Over the past 24 hours, liquidation amounts dropped significantly to $203 million. Meanwhile, open interest has also declined, indicating that traders are reducing their use of leverage.
From a technical perspective, Bitcoin remains above the 7-day simple moving average at $80,308. Its 14-day Relative Strength Index (RSI) is 56.09, indicating that momentum remains neutral rather than overbought.
ETF fund outflows could become a risk
A potential short-term risk for Bitcoin may come from U.S. spot Bitcoin ETFs. Specifically, these products experienced net outflows of $277.5 million on May 7 and another $145 million on May 8, ending the previous trend of capital inflows.
Analysts are closely monitoring whether Bitcoin can hold the key support level at $80,090. If this support holds, traders believe Bitcoin may attempt to retest its recent high near $83,500.
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