Shift in Key Options Bet Suggests S&P 500 Can Rally Even Further

Options traders are betting on more gains in the S&P 500 Index after it hit a record high on Friday.

A slew of bullish wagers shifted the yardstick of what’s seen as the upper bound of the US benchmark’s trading range. The so-called “call wall” has moved to 5,000 points from 4,800 — signaling that traders see the market clearing the next hurdle toward further gains, according to SpotGamma data. That points to a further 3.3% of upside, based on Friday’s close.

While options traders turn more bullish, lower earnings expectations — which makes upside surprises easier —and a potential supportive message from the US Treasury are among catalysts that could see the wider market helping keep the equity rally going.

SPX Close

Source: Spotgamma

The shift in the options market structure is “inviting a climb higher,” said SpotGamma founder Brent Kochuba. The move was driven by a pattern of call buying, especially chasing index-heavyweights such as the “Magnificent Seven” group of tech megacaps that include Apple Inc. and Inc.