Chris Murphy on 2025 Options Market Trends: Low Correlation and Cautious Optimism

Key Takeaways from the Options Market in 2025

• 📈 The dominant theme for most of 2025 in the options market was low correlation between index products.
• 💡 This meant that while major indices didn't move significantly, there were massive price swings in individual stocks, including AI names, Nike, and home builders.
• 🎯 The increased liquidity in options markets has amplified the ability to trade individual stock movements and capitalize on higher individual stock volatility by selling options.

Market Positioning for the Year Ahead

• 🧐 The options market is signaling a cautiously optimistic outlook for the upcoming year.
• 🚀 While there's been a recent pause in some tech stocks, consistent buying of call spreads is observed, particularly in the Mag Seven names.
• ⚠️ Traders are reducing underlying positions but are keen not to miss potential rebounds or further upside, leading to trades that take advantage of elevated call skew.

The Impact of 24/7 Trading

• 🌍 While 24/7 trading is emerging, liquidity is expected to remain concentrated in US trading hours.
• ⚡ Aggressive after-hours or pre-market trades in instruments like the VIX or S&P are seen as indicators of a strong desire to act on information without waiting for the market open.
• 😴 The speaker expresses a personal preference against trading late into the night, suggesting a continued reliance on traditional trading windows.