• Traders pay the most for Apple protection since August

• Magnificent 7 stocks are down this year after 2023-2024 surge

After two years of chasing the seeming unstoppable rally in big technology stocks, options traders are showing signs of fatigue.

Investors are lining up more protection as the so-called Magnificent 7 lags the broader stock market on growing concerns over US dominance in artificial intelligence and the broader economy. That’s a striking turnaround from the recent past, when a few tech giants dominated gains in the S&P 500 and Nasdaq 100 indexes.

“The stocks that have rewarded investors for the last two years are the ones that are taking it on the chin right now,” said Joe Mazzola, head trading and derivatives strategist at Charles Schwab Corp.

Options costs have been rising in the second half of February for most of the Mag 7 companies. Apple Inc.’s three-month implied volatility reached the highest since September last week, and its skew was the steepest since August, when yen carry trade unwinds spooked global financial markets and boosted demand for protection.

While traders are typically willing to pay more for downside protection than to speculate on the upside, it was a different story for tech stocks during the post-pandemic bull run. Back then, confidence in the Mag 7 was so high that the premium all but disappeared, with the market even charging more for calls than puts on some names.

“These skews were so heavily weighted towards the call side for the last couple years,” said Mazzola, adding that skews “have not been normal.” “Not only did investors want to buy shares, but they also wanted to buy upside too — and for the most part, they’ve been rewarded for that.”

Another sign of the unease is the growing positioning of puts in stocks like Nvidia Corp. The buying of bearish options has led to a buildup in negative dealer gamma for contracts with strikes between $115 and $130, according to Nomura. That may exacerbate price swings as dealers rebalance positions.

Nvidia Dealer Gamma

The Bloomberg Magnificent 7 Index is down 6.5% in 2025 after more than tripling over the previous two years, dwarfing the S&P 500’s 58% return over that period. Now, there are signs of rising nervousness across the board — from implied volatility, to skew and put-to-call ratios — as traders eye this week’s economic data.

Investors will parse a batch of crucial figures — including factory activity on Monday, service-sector data on Wednesday and nonfarm payrolls Friday — for insight into the Federal Reserve’s rate outlook and, ultimately, the direction of the US stock market. With potential new tariffs adding to uncertainty for companies, options protection is getting more expensive.

In the rates market, risk-off mode has also dominated recently, with benign inflation data boosting wagers on Fed interest-rate cuts. On Friday, yields on US Treasuries for two-, three- and five-year notes moved toward the 4% threshold for the first time since October, while those on the 10-year note fell to 4.2%.

The bullish tech dynamic began to unwind even after shares recovered from the DeepSeek AI-triggered selloff in late January, with volatility rising, put skews steepening and the call-to-put ratio falling on Thursday to the lowest level since September. Even options on Tesla Inc. — whose shares almost doubled at one point after the election, benefiting from Elon Musk’s proximity to the White House — are now showing a bearish tilt.

And the jitters are not limited to tech stocks: An early sign of broader market concern came around Feb. 18, when institutional investors started buying large hedges against a spike in the Cboe Volatility Index. Until a pop in the S&P 500 late Friday, the bearish sentiment had pushed the spread between the VIX and S&P 500 realized volatility to its highest level since December.

“The past few days’ increase in the VIX has largely been unmatched by SPX realized vol, leaving SPX implied vol looking especially expensive,” Rocky Fishman, founder of derivatives analytical firm Asym 500, wrote in a note.