Whipsaw market actions leaves traders looking for direction. The 'fear gauge' might offer a clue

A trader works during the Hawkeye 360 Inc. initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, US, on Thursday, May 7, 2026. Michael Nagle | Bloomberg | Stock bulls proved resilient in the face of what could have been the worst sell-off in the Nasdaq 100 since March, as the index staged a 1.5% intraday rally into the close and the S&P 500 ended less than 12 points lower on Tuesday. The turbulence helped sort out where options traders have the most conviction. Most notable might be that volatility in the S&P 500 as measured by the Cboe VIX Index ended down on the day, despite a brief pop to 19.01, the highest since April 28. It's the latest example of the disconnect in volatility between the benchmark index and its individual components, who are seeing massive swings and soaring options prices. Stock Chart Icon Stock chart icon Cboe Volatility index, YTD The muted VIX arguably presents a hedging opportunity that looks cheap in comparison to volatility in semiconductor stocks that's 2.5 times more expensive. That trade seemed to get some attention Tuesday as VIX options were the 10th most-active traded, with four times more calls bought than puts. "We like owning June VIX calls as a hedge with oil going above $100," Brent Kochuba, founder of options-data provider SpotGamma, wrote in a note to clients Tuesday morning. …