- Record $2.6T in S&P 500 call options fueled a powerful Wall Street rally driven by momentum.
- Analysts warn the stock surge may rely more on trading mechanics than economic strength.
- Bitcoin climbed with stocks, while ETF outflows emerged as a new short-term market risk.
A record-breaking wave of options trading on the U.S. stock market is raising concerns among analysts. Some say the latest rally may be driven more by trading activity than real economic strength.
On X, market analyst Bull Theory said traders bought a record $2.6 trillion worth of S&P 500 call options in a single day, the highest level ever recorded since tracking began in 1999.
Notably, call options are bets that stock prices will keep rising. But analysts say the bigger issue is how these trades can push the market even higher on their own.
When traders buy large amounts of call options, market makers often respond by purchasing the actual stocks to protect themselves from risk. That extra buying can drive prices up further, attracting even more bullish traders and creating a cycle of rising momentum.
Bull Theory argues that the current rally is driven more by trading mechanics than by company earnings or strong economic data.
Goldman Sachs Traders See Signs of Excessive Speculation
The unusual market activity has also caught the attention of traders at Goldman Sachs, who reportedly described the market as being in a “semi-irrational chasing mode.”
Analysts are also watching the Philadelphia Semiconductor Index. Its Relative Strength Index (RSI) reportedly reached its highest level since 1999, the period associated with the peak of the dot-com bubble.
While analysts are not saying today’s market is exactly like the dot-com era, the similarity in momentum levels is making some investors nervous.
Bull Theory warned that the biggest risk could come when traders start closing their options positions or when contracts expire. If the buying pressure fades, markets could reverse quickly.
The analyst described the rally as “running on jet fuel, not fundamentals,” suggesting the market may struggle once the momentum slows.
Bitcoin Rises Alongside Stocks
Meanwhile, Bitcoin also moved higher, gaining 0.95% in the past 24 hours to trade near $80,384 at press time.
Analysts said Bitcoin’s move appeared tied more to the broader stock market rally than to crypto-specific news. Data showed Bitcoin had a strong 71% correlation with the S&P 500, meaning both markets are reacting similarly to current macroeconomic conditions.
The wider crypto market also climbed, with total market capitalization increasing 1.46% during the same period.
Despite the price gains, speculative activity in Bitcoin markets actually cooled. Liquidations have dropped significantly over the past 24 hours to $203 million. At the same time, open interest also declined, suggesting traders are using less leverage.
From a technical standpoint, Bitcoin stayed above its 7-day Simple Moving Average of $80,308. Its 14-day RSI stood at 56.09, showing momentum remains neutral rather than overheated.
ETF Outflows Could Become a Risk
One possible short-term concern for Bitcoin came from U.S. spot Bitcoin ETFs. Specifically, the products saw $277.5 million in net outflows on May 7 and another $145 million on May 8, ending a prior streak of inflows.
Analysts are now watching whether Bitcoin can stay above the important $80,090 support level. If that support holds, traders believe Bitcoin could attempt another move toward the recent local high near $83,500.
Related: Bitcoin Price Prediction: Tom Lee Says One Monthly Close Ends the Bear Market for Good
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