As the earnings season approaches for US tech giants, the "bottom-fishing army" in the options market has vanished without a trace

According to Zhitong Finance APP, as the earnings season kicks off, options traders are wary that the stock prices of U.S. tech giants, which have been continuously struggling, will face greater volatility, and there are no signs of easing in this stock market crash.

This further confirms that the "buying on dips" strategy is becoming ineffective. Although this year the stock prices of the "seven giants" in the U.S. stock market, including NVIDIA (NVDA.US), Tesla (TSLA.US), and Apple (AAPL.US), have been severely impacted, options traders are increasingly seeking protective measures against further declines.

A significant indicator is the ratio of call options to put options. Compilation data shows that this ratio is currently hovering near its lowest level since the end of 2023. On Monday, U.S. stocks continued to decline, with concerns about global trade and President Trump's threats to replace the Federal Reserve Chairman exacerbating market panic.

JJ Kinahan, CEO of options brokerage TastyTrade, stated that this round of selling "may last longer than people expect. Investors are all guarding against the risk of continued market downturn."

This defensive options betting reflects that various concerns, from the restructuring of the global trade system to excessively high stock valuations, have completely shattered the optimistic sentiment that investors formed after two years of a bull market. The S&P 500 index has fallen 16% from its February peak, while the index tracking the "seven giants" has dropped nearly 30%.

The earnings season adds new variables to the market. Although tariffs had a limited impact on first-quarter performance, investors are worried that corporate executives (including those from tech giants) may issue pessimistic outlooks—even if these companies have substantial balance sheets and industry dominance, they may not be immune to the shocks of global trade turmoil. Tesla will announce its earnings after the market closes on Tuesday Eastern Time, marking the first earnings disclosure among the "seven giants."

Valuation Retreat

The stock market crash has led to a general retreat in the valuations of the "seven giants." Compilation data shows that these seven companies currently have a price-to-earnings ratio of 22 times, down from a long-term average of 28 times. Some companies have seen more significant valuation adjustments, such as chip manufacturer NVIDIA, whose stock price has fallen to its lowest valuation level in the AI era.

However, such discounts have not yet attracted a large amount of bottom-fishing capital, highlighting the impact of issues like tariffs on tech giants and the entire U.S. stock market. For example, the U.S. government last week banned NVIDIA from selling H20 chips to China.

It is certain that this options ratio has previously exhibited contrarian indicator characteristics. The last time the ratio was below the current level was in early November 2023, when the stock market was experiencing its longest monthly decline since the pandemic outbreak, after which the S&P 500 index began a new round of surging.

However, when concerns about tariffs undermining U.S. advantages simultaneously impact Treasury bonds, the dollar, and the stock market, it takes immense courage to heavily invest in large-cap stocks at this moment.

Daniel Kirsch, head of options at Piper Sandler, stated: "The selling of Treasury bonds, the reduction of stock holdings, and the weakening of the currency all point to the same issue: investors are retreating from the U.S. market. When a triple sell-off occurs simultaneously, it is certainly not a good sign." ”