As earnings season kicks into gear, options traders are wary that the battered shares of the biggest US technology companies are headed for more turbulence in a stock-market rout that shows no signs of easing.

Chalk it up as more proof that the buy-the-dip mentality is on the way out. While this year’s selloff has been particularly brutal for the shares of companies such as Nvidia Corp., Tesla Inc., Apple Inc. and other members of the so-called Magnificent Seven, options traders are increasingly favoring protection against further declines.

One particularly stark gauge has been the ratio of calls, which profit when shares rise, relative to puts, which are typically used to guard against falling prices. That measure is hovering near its lowest level since late 2023, data compiled by Bloomberg show. US stocks extended their declines on Monday, as worries over global trade and President Donald Trump’s threats to replace the Federal Reserve Chair further unnerved investors.

The selloff is a “little bit more extended to the downside than perhaps people thought it would be,” said JJ Kinahan, chief executive officer of options broker TastyTrade. “People want to make sure they’re not caught in case we continue downward.”

The defensive options bets highlights how worries over everything from a realignment of the global trade system to lofty stock valuations have punctured investor optimism following a two-year run of strong equity market returns. The S&P 500 is down 16% from its February record while an index tracking the Magnificent Seven stocks is off almost 30%.

Earnings season adds another variable into the mix. While tariffs are not expected to have much of an impact on first-quarter earnings, investors are wary of dire outlooks from executives — including those at the biggest tech companies, whose massive balance sheets and dominant industry positions may not be enough to shield them from global trade turbulence. Earnings for the Magnificent Seven kick off after the close Tuesday with results from Tesla.

Cost Concerns

Many of the Magnificent Seven have become less richly valued as a result of the stock market’s tumble. A gauge of the seven companies is trading at 22 times projected profits in the next 12 months, compared with a long-term average of 28, data compiled by Bloomberg show. For some individual companies, the contrasts are even sharper — chip maker Nvidia’s shares, for instance, are trading near the lowest valuation of the artificial intelligence era.

Such discounts have failed to draw many dip-buyers so far, underlining the tariff concerns and other risks clouding the Magnificent Seven heavyweights and US stocks more broadly. For example, US authorities last week barred Nvidia from selling the H20 chip line in China.

To be sure, the ratio has shown signs of being a contrarian indicator. The last time it fell lower than current levels was around early November 2023, in the wake of stocks’ longest monthly slide since the onset of the pandemic. The S&P 500 Index then kicked off another leg in its furious rally.

But with worries over a tariff-driven decline in US exceptionalism fueling selloffs in Treasuries and the dollar as well as equities, it might take some conviction to leap back into megacap stocks right now.

“Treasuries selling off, equities selling off, currency weakening, It’s all telling you the same thing: people don’t want to invest in the US,” said Daniel Kirsch, head of options for the brokerage Piper Sandler. “If you are getting all three selling off at the same time, it’s not a great backdrop.”