00:00 Speaker A
Well investors rotating back into tech as markets look for footing after AI disruption, turbulence, Mike Co, title Financial Group yield Max strategist, joining us now to discuss the tradeable signals in the options pit sponsored by Tasty Trade. Mike, my friend, always good to see you. Maybe, maybe let’s start bigger picture, Mike cuz you can see there has been, you know, a lot of institutional hedging demand, Mike. You can see that in in a, the elevated Vics. So it seems like investors quick to hedge, even though just looking at, I mean the major indices we’ve gone
00:27 Speaker A
basically nowhere in months. I just curious to get your take on that, Mike. I mean, how how do you, how do you want to play this in the options market?
00:33 Mike Koe
Well, you know, it’s interesting, we’ve seen a huge rotation. I think the rotation really started quite some time ago, began in the second half basically of last year, if we’re looking at tech specifically, when we saw this enormous divergence take place between software and hardware. If you look at the first half of last year, basically those two tracked, you know, lock step together through the end of the second quarter. and then from basically the end of the second quarter through the year end of the year, hardware outperformed software by about 17 and a half percent. and as big as that divergence was, it widened much faster this year. We saw the hardware outperforming software by more than 20%. So that means you’ve got Nvidia basically holding in there. You’ve got the AMAT and Microns really taking off. We saw a lot of bullish flows in those, but then you have things like Microsoft and AppLovin, into it and Adobe that, you know, I I don’t think there’s a fairer way to describe it than just that they’ve been slayed this year.
01:39 Speaker A
What about Mike, uh more broadly the chip sector? I’m just looking at the, you know, the SMH here, the ETF that tracks the sector. We’re already up Mike, nearly 20% this year. We’re up around 80% over the past 12 months. Your thoughts there?
01:55 Mike Koe
Yeah, I mean, those obviously have been hot sectors. We we have actually two funds that focus principally on the hardware side, both Chipy and and uh Soxy are two of the funds we have that focus on the semis and uh they’ve obviously been huge performers. I mean, it’s almost hard to believe when you take a look at names like Micron technologies, for example, after the after the phenomenal year that it had last year, you know, up north of 60 since the beginning of this year. So, you know, one of the things I think that justifies that is that a lot of this trade still does depend on some of those legacy uh chip makers, that’s one part of it. The other was that if you go back about 18, 24 months, many of those companies were actually quite cheap uh relative to the rest of the market, partially because they’re viewed as cyclical and hadn’t really gotten attached to this trade as much as I think they have recently.
02:39 Speaker A
Finally Mike, uh AI disruption fears, you know, front and center, software’s in the crosshairs. The IGV, the software ETF has been shelled. I’m just curious what you see ahead, Mike.
02:54 Mike Koe
Yeah, it it as we were just talking about that. I mean the underperformance this year has been stark. But you know, what’s interesting is that it’s one of the best performing sectors today. You take a look at the options flow in IGV call significantly above their average volume and significantly out pacing puts. and that’s actually true for some of the worst performing single stocks that are part of that as well. So I’m talking now about names like into it and AppLovin, Microsoft actually seeing some bullish flows in there. That stock has been very hard hit this year as well. So, you know, I don’t know whether we can really extrapolate from a day or two of relative out performance because that’s basically all we have is about two days of it, but they did seem to catch a bit of a bid this week. Maybe the worst of that is over.
03:37 Speaker A
Mike, as always, so good to have you on the show. Thank you.