Options volume on 3x inverse semiconductor ETF SOXS surges as chip stocks sell off

Wall Street traders piled into low-cost derivatives to bet on further declines in US semiconductor stocks after the sector plunged about 7% just one day after hitting an all-time high, CNBC reported Tuesday (local time).

Data compiled by options trading platform thinkorswim showed that options volume on SOXS — the Direxion Daily Semiconductor Bear 3X ETF — exceeded three times its one-month daily average that day, with call options outpacing put options by a ratio of more than 6 to 1.

SOXS tracks 300 percent of the inverse daily performance of the Philadelphia Semiconductor Index, meaning call options on the fund are effectively bets on a decline in that index.

The low entry cost — with shares trading in the low $4 range — drew speculative interest. Options volume on SOXS reached 260,000 contracts that day, surpassing the 172,000 contracts traded on the VanEck Semiconductor ETF (SMH), a long-direction semiconductor fund.

SOXS surged 24 percent on the day.