Software stocks are crashing up. Here are the winners

• Traders purchased over 50,000 call options on IGV in Friday's session compared to under 6,000 puts, with call volumes outpacing puts by a factor of 5 in stocks like ServiceNow
• More money traded in IGV options ($140 million total, with $120 million in calls) than in semiconductor ETF SMH by midday Friday
• The most popular contract by volume was the June 18 105-strike call with over 20,000 contracts traded, requiring just over 5% upward movement to break even

Summary: Software Stocks Rally Draws Heavy Options Activity

Software stocks are experiencing a dramatic surge, transitioning from recovery into a full bull market, with traders aggressively positioning for further gains through options markets.

Key Market Activity

The iShares Expanded Tech-Software Sector ETF (IGV) is seeing extraordinary trading volume, with activity exceeding 5x its 30-day average. Options trading heavily favors bullish positions, with call volumes outpacing puts four-to-one. On Friday alone, traders purchased over 50,000 calls compared to under 6,000 puts on IGV.

Financial Data

Options premium in IGV reached $140 million by midday Friday, with $120 million concentrated in call contracts—surpassing even semiconductor ETF (SMH) trading volume. This represents a significant shift in trader sentiment toward software over semiconductors.

Notable Companies

ServiceNow, Zscaler, and other major software names experienced substantial Friday gains, yet call option volumes still exceeded puts by a factor of 5, indicating continued bullish momentum expectations.

Trading Strategies

The most popular contract was the June 18 105-strike call with over 20,000 contracts traded, requiring just above 5% upside to break even. Some traders employed hedging strategies through call spreads, with notable multi-million-dollar sales of 90-strike December calls.

Market Implications

According to Dan Deming of KKM Financial, traders are betting on mean reversion favoring software over semiconductors, describing the rotation as "dramatic." The positioning suggests expectations for sustained outperformance in the software sector, marking a notable sector rotation in technology markets.