The sentiment betting on a rise in the U.S. options market has surged significantly, reaching the highest level this year — is the risk market rebounding or reversing?

The trading volume of call options has hit a new high, while put options, although not low, are clearly weaker. This indicates that the current trading focus in the market is moving upwards, with a lot of capital being used to bet on continued upward elasticity with options.

To put it simply, it's not a risk-averse sentiment dominating the market now, but rather a chasing-the-up sentiment.

Of course, a large volume of call options does not necessarily mean that the market is entirely bullish.

Because within the volume, there are true buyers of calls, as well as those selling call options to earn premium, along with closing positions, rolling positions, and making combinations. Therefore, this chart can at most only indicate that trading in the upward direction is very crowded, with the market focusing on the matter of continuing to rise.

Behind this, there are generally two possibilities.

One is that the market is genuinely strengthening, with funds willing to continue to leverage and chase momentum, especially if there has been recent positive news, or if macro factors, negotiations, or policies have restored risk appetite, then the surge in call options volume is very normal.

The other possibility is that short-term sentiment has started to become overheated. Moreover, this occurs after a clear rebound, which likely indicates that many people have begun to worry about missing out and have started to chase call options. During such times, prices are the easiest to push further upward, but they are also the most fragile.

From a fundamental perspective, although there is currently a "safe period" between the U.S. and Iran, the core focus of the market's game should still be on monetary policy. At present, this rise may reflect short-term expectations for a ceasefire, lowering the probability of interest rate hikes and recessions, thus promoting a rise in options positions.

If prices do not continue to rise later or if the positive news falls short of expectations, this portion of positions will decay very quickly, and the forces that previously pushed prices up may also turn into selling pressure afterward.

Therefore, my personal view is that many people in the market are betting on further rises, and the short-term bullish sentiment has already become quite heated, even somewhat crowded. While prices may continue to be pushed upward, the main game has not yet settled, so once the sentiment reverses, a pullback may also happen very quickly.

Currently, the probability of a rebound remains higher.

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