What MSFT Says About Tech Sector Momentum & NDX Volatility

Kevin Davitt, head of Index Options Content at Nasdaq, discusses the unusual velocity of the Nasdaq 100's 33% rally from March to May 2024, comparing it to past recovery rallies. He notes that option metrics like put/call ratios and volatility spreads are at extreme levels, suggesting a lopsided market. He advises using options for risk insulation against potential mean reversion, similar to the August 2024 unwind.

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What MSFT Says About Tech Sector Momentum & NDX Volatility

NDX; MSFT

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Davitt acknowledges the strong rally (33% in 42 days) but repeatedly warns about extreme option metrics and historical analogs that suggest a potential mean reversion. He advises using options to insulate against a reversal, implying a cautious near-term outlook despite the uptrend.

yields

No direct mention of yields, but the discussion of low macro market volatility and the comparison to August 2024 (which saw a volatility spike) implies a view that current calm may not persist, but no directional bias is given.

Marley Kayden

Questions the sustainability of the Nasdaq 100's rapid pace as the first half of 2026 closes, noting that some tech names are being punished despite good earnings.
Kevin Davitt

The velocity of the Nasdaq 100's move off March lows is historically unusual; a 33% gain in a 42-day rolling period is comparable only to rebounds from the COVID crash (2020), GFC (2009), dot-com bust (2002), and late 1990s. This raises caution about potential mean reversion.
Marley Kayden

Notes that the historical analogs are all tied to recession recoveries, which is not the current backdrop. Asks what NDX index options volume reveals about institutional manager activity.
Kevin Davitt

NDX options volume has grown nearly 400% since 2022, driven by broad retail adoption (e.g., Schwab clients) using short-dated, defined-risk spread trading, particularly put selling. This reflects a market moving toward cash-settled vehicles for granular risk management.
Marley Kayden

Asks which specific macro catalyst or risk event is drawing the heaviest institutional hedging, based on options chain pricing for the next month.
Kevin Davitt

Option-based measures are at extreme levels: put/call ratios are as skewed as in 2021 (meme stock squeeze era), correlation measures are at historic lows, and NDX volatility is at a significant premium to S&P volatility. This lopsidedness suggests a potential unwind, similar to August 2024.

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