Here are the odds of bear markets in each stock index this summer
Key takeaways
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- U.S. stocks just flopped again as fresh selling in the all-important tech cohort dragged all major indexes into the red after an early attempt to rally Wednesday.
- The question on every trader's mind: how bad could it get?
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U.S. stocks just flopped again as fresh selling in the all-important tech cohort dragged all major indexes into the red after an early attempt to rally Wednesday.
The question on every trader's mind: how bad could it get? With the epic rally in AI stocks now taking major hits, it's a fair question, and one that options-market makers are always calculating. To get the odds of a specific move, investors need only to pick the relevant strike price of a security's option and the delta of that corresponding contract, from which the odds of closing in the money, or touching the strike, can be approximated.For the S&P 500, a technical bear market decline of 20% from the closing high of 7,610 would mean a slide to 6,088. Put contracts on the index are pricing in a 10.5% chance it closes at that level on Aug. 31, according to data from ThinkOrSwim. The odds of it touching that price between now and then are generally double, or about 21%. For the Nasdaq 100, the chance goes up to 32%.