SK Hynix Sees Panic Buying in Put Options Chip Sector Stumbles: Options Chatter

$SK hynix (SKHY.US)$ faced a wave of intense selling pressure as investors rushed to secure downside protection amidst a broader regional market correction.

The open interest, or the tally of outstanding options contracts, showed investors building up positions in put options that can shield them against a continued downturn. There are now 1.96 put options for every one call option. That ratio shows that market participants are heavily favoring bearish put options over bullish call options as anxiety mounts across artificial intelligence supply chains.

The selloff in memory stocks came after $CXMT Corporation (688825.SH)$ completed an $8.6 billion initial public offering on Shanghai's STAR Market, giving the Chinese company access to a massive capital injection that could help it drastically expand its capacity.

While SK Hynix currently maintains a strong lead in premium High Bandwidth Memory (HBM), CXMT’s rapid capacity buildout threatens its traditional DRAM footprint. By the end of 2026, CXMT is projected to produce roughly 350,000 DRAM wafers per month—nearing the output scale of top-tier global peers like $Micron Technology (MU.US)$ (375,000 wafers/month), according to Citrini Research data reported by TechPowerUp.

Nomura Holdings analyst Donnie Teng estimates CXMT’s DRAM output could grow as much as 45% annually, expanding its global market share from 10% today to about 18% by late 2028, according to the report. As low-cost Chinese supply flooded the mainstream market, this surge in volume could trigger price erosion in commodity DRAM, squeezing profit margins for SK Hynix and pressuring its stock price as investors weigh the impact of heightened competitive tension.

Underneath the surface price action, options metrics reveal a market gripped by extreme stress amplified by growing macro anxieties. This fundamental unease pushed historical volatility to 176.5%, vastly outpacing an implied volatility of 130.61%. Historical volatility measures how wildly a stock has actually bounced around in the past, while implied volatility reflects what option traders expect future price swings to look like.

When historical volatility exceeds implied volatility, it means the underlying asset is moving even more violently than option prices had baked in, catching short-term speculators off guard.

The options structure further exposes this panic through the volatility term structure and volatility smile. The term structure shows a steep downward slope where near-term contracts expiring at the end of the week command extreme implied volatility near 182%, compared to much lower levels for back-month options.

This skew is mirrored in the volatility smile, where out-of-the-money put options are bidding up to astronomical volatility levels above 780%. That could mean market participants are paying exorbitant prices specifically for crash protection on short-duration contracts, fearing immediate downside rather than betting on a recovery.

Block orders and trade overviews show net outflows of $158.40 million yesterday, while profit ratios sit at less than 1%, indicating that almost all the American depositary receipts purchased when SK Hynix listed in the U.S. are sitting on unrealized losses.

Share your thoughts on SK Hynix and other memory stocks like Micron in the comments section. Do you expect SK Hynix and Micron to keep declining, or is the selloff now overdone? Let your voice be heard by voting below. For those reading my Options Chatter column for the first time, you can also see more of these short seller columns by following me here, where you can also find my other columns and interesting stories on some of the biggest stocks.

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