With Earnings Ahead, Big-tech Dip Buyers Disappear in the Options Market

As earnings season begins in earnest, options traders are signaling increased caution toward the largest U.S. technology stocks, which have already endured sharp declines this year. The recent downturn in the broader stock market, with no clear signs of a near-term recovery, is reinforcing a shift away from the once-popular “buy the dip” strategy.

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High-profile tech giants such as Nvidia, Tesla, and Apple—part of the so-called “Magnificent Seven”—have faced significant selling pressure, and options traders are increasingly seeking downside protection in anticipation of further losses. One telling indicator of this defensive stance is the call-to-put ratio, which reflects investor sentiment.

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Calls are contracts that benefit from a rise in stock prices, while puts are typically used as protection against declines. That ratio has now dropped close to its lowest level since late 2023, according to Bloomberg data.

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On Monday, U.S. stocks continued their descent amid growing concerns about global trade disruptions and political uncertainty, including threats from former President Donald Trump to replace the Federal Reserve chair. These headwinds have contributed to deepening investor anxiety and suggest that the market’s downturn may have more room to run.

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JJ Kinahan, CEO of the options brokerage TastyTrade, said the market has fallen further than many expected. “People want to make sure they’re not caught off guard if this decline continues,” he noted, emphasizing the increasing preference for protective strategies.

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This shift in sentiment highlights how a mix of factors—from trade instability to high stock valuations—is undermining investor confidence. Following a strong two-year performance for equities, the S&P 500 has now dropped 16% from its February peak, while a gauge tracking the Magnificent Seven is down nearly 30%. These losses are prompting traders to hedge their bets more aggressively.

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The start of earnings season adds further complexity. Although first-quarter earnings are not expected to reflect much direct impact from tariffs, there is growing concern that tech executives may issue cautious guidance about the months ahead. Even companies with dominant market positions and strong financials might struggle to escape the broader headwinds posed by trade disputes and economic uncertainty.

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Tesla, one of the key Magnificent Seven members, is set to report results after the market closes on Tuesday, kicking off what could be a volatile stretch for the group.

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Meanwhile, valuations have become more reasonable across the Magnificent Seven as their stock prices have fallen. Collectively, these companies are now trading at about 22 times projected earnings over the next 12 months—well below their historical average of 28, based on data. Some firms, such as Nvidia, have seen even steeper valuation drops. The chipmaker’s stock is now priced near its lowest point since the AI boom began, following news that U.S. authorities banned the sale of its H20 chip to China.

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Despite the reduced valuations, bargain hunters have largely stayed on the sidelines. The lack of enthusiasm for discounted prices suggests that worries about trade tensions and broader economic challenges are outweighing any perceived value in the stocks. This adds another layer of concern for traders and investors who had previously flocked to these tech giants for safety and growth.

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Interestingly, the call-to-put ratio has acted as a contrarian signal in the past. The last time it reached such low levels was in early November 2023, following one of the worst monthly stock performances since the pandemic began.

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After that, the S&P 500 staged a strong rally. Still, history may not repeat itself this time, especially with mounting fears that the U.S. is losing its edge due to tariff disputes and weakening investor confidence.

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The current climate has sparked simultaneous selloffs in multiple asset classes—stocks, Treasuries, and the U.S. dollar. This across-the-board retreat is troubling for market observers. Daniel Kirsch, head of options at Piper Sandler, explained, “When Treasuries, equities, and the currency are all falling at once, it sends a clear message: investors are pulling back from the U.S. market.” He added, “It’s not a supportive environment for jumping back into megacap stocks right now.”

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In short, traders are bracing for more volatility as the earnings season unfolds, particularly among the market’s biggest names. While some valuation metrics look more attractive, persistent geopolitical and economic worries have shifted sentiment sharply toward caution. As a result, investors appear more inclined to protect their portfolios than bet on a quick rebound.

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