Something unusual happened in the options market last week, and if you know what to look for, it tells you a lot about where we are in this rally — and how to make money from it potentially.
Call buying in tech stocks hit what Schwab’s market strategists described as “sky-high levels.” Traders piled into bullish options on AI chipmakers, software companies, and Magnificent Seven names at a pace that raises an uncomfortable question: is this genuine conviction, or is it the kind of fear-of-missing-out that tends to show up right before markets get wobbly?
To be clear, the underlying story is real. NVIDIA just crossed a $5.2 trillion market cap and is on pace to top $40 billion in equity investments in 2026 alone. The Roundhill Memory ETF surged nearly 30% in a single week. The S&P 500 set fresh all-time highs, powered almost entirely by a handful of AI-adjacent names. There are legitimate reasons to be long tech.
But when call buying reaches extreme levels, the options market is essentially telling you something about positioning. Too many people on the same side of a trade is never ideal. It sets up a situation where if sentiment shifts even slightly — a geopolitical flare-up, a CPI print that scares rate traders, Nvidia earnings that disappoint by any measure — the unwind can be fast and ugly.
This Is Actually An Opportunity For Income-Oriented Options Strategies
When implied volatility rises — as it tends to do when options demand spikes — the premium on selling options goes up. That’s the core of strategies like covered calls and cash-secured puts. You’re being paid more for the same risk.
Covered calls on positions you already own. If you’re sitting on significant gains in Nvidia, Alphabet, or any of the other AI names that have run hard over the past month, selling a covered call against your position lets you collect premium while setting a ceiling on your upside. Yes, you give up gains above the strike price if the stock keeps ripping. But if FOMO has stretched valuations and the stock consolidates or pulls back — which is the scenario the options market’s own signals are warning about — you keep the premium and your shares. In a market where one analyst firm is literally comparing the current AI trade to “the internet on steroids,” a little hedging via covered calls isn’t pessimism. It’s discipline.
Cash-secured puts on names you’d buy anyway. The flip side of the same strategy: identify quality companies you’d genuinely want to own at a lower price, then sell puts at that strike. If the stock pulls back to your target, you’re obligated to buy it — but at a price you chose, and you collected a premium in the meantime. If the stock stays elevated and the put expires worthless, you simply pocket the income and move on. In a high-implied-volatility environment, these premiums can be genuinely meaningful.
The Iran factor adds a wrinkle. Schwab’s market update specifically noted it would be interesting to watch whether downside hedges get taken out this week, particularly in AI. The Trump-Xi summit and the unresolved Strait of Hormuz situation create binary event risk — a peace deal could send oil lower and risk assets higher; a stalemate could do the opposite. When you have binary events ahead and implied volatility is already elevated, the premium environment for selling options tends to be favorable. The market is, in effect, paying you for your willingness to take on risk.
What to avoid right now. The worst thing you can do in this environment is buy speculative calls outright. Paying sky-high implied volatility for upside bets is a losing game over time. You’re essentially paying for someone else’s FOMO insurance. The people winning in this environment are the ones selling that insurance, not buying it.
The April CPI data on Tuesday morning is a key catalyst. If core inflation comes in hotter than expected — and with oil near $100 and gas at $4.50, there’s a real chance energy is leaking into core prices — rate expectations will shift, and tech could face a sharp pullback. Having a portfolio structured around income and defined risk, rather than naked long exposure, is how you survive those days without destroying your year.
The options market is currently rich with premium. That’s a gift — if you know how to use it.
