RBC’s Amy Wu Silverman on what options say about equities

Summary

Amy Wu Silverman, RBC's head of derivatives strategy, explains that options markets are signaling a rotation in equity leadership rather than a market breakdown. Subdued VIX masks high single-stock and semiconductor volatility as momentum fades. The market is looking for new leaders, which could lead to broader participation, with small caps already outperforming.

• Subdued VIX under 20 despite historically high single-stock and semiconductor implied volatility indicates a rotation, not a breakdown
• Momentum trade is flagging, with a multi-standard-deviation decline, but technical momentum differs from sector rotation narratives
• Market wants new leadership, potentially broadening beyond the concentrated chip/AI trade
• Small caps (IWM) are the best performer relative to S&P 500 and Nasdaq, up 20% year-to-date
• AI capex should eventually benefit other sectors, but health care and select industrials are already doing well
• Options suggest continued high dispersion, with zig-zagging canceling out at the index level