• Record options volume of 112 million contracts traded Thursday, 53% above October's daily average, as investors rushed to hedge against a sharp selloff.
  • Put options accounted for just over half of all contracts, while the S&P 500 fell 4.4% and the Nasdaq 100 dropped more than 6%.
  • The VIX spiked to its highest level since March, and global markets felt the shock, with Japan's Nikkei falling 6.7% and South Korea's KOSPI triggering a circuit breaker.

A Frenzy of Hedging

US options trading surged to an all-time record on Thursday, November 5, as investors scrambled to protect portfolios against a broad equity selloff. More than 112 million contracts changed hands, according to people familiar with the matter, a 53% jump over October's daily average. Put options, typically used as downside protection, made up just over half of the volume, underscoring the defensive dash.

The rout was triggered by concerns that Democratic victories in the midterm elections could lead to tighter restrictions on AI infrastructure and data-center development. But the reaction was amplified by crowded positioning: investors were already unwinding hefty AI bets, and the political shock forced a rapid deleveraging. The S&P 500 fell 4.4%, the Nasdaq Composite dropped 5.5%, and the Nasdaq 100 lost roughly 6.3%. The Composite closed in correction territory, down at least 10% from its recent peak.

The VIX Flares

Volatility metrics painted a picture of panic. The CBOE (CBOE:CBOE) Volatility Index (VIX) surged to an intraday high of 28.36 before closing at 28.18, its highest close since March. The intraday jump was the largest since the April 2025 tariff shock. Meanwhile, index put premiums were running at roughly twice their typical level, according to data from Mercury Alerts cited by Reuters (NASDAQ:TRI), making fresh protection costly.

"We saw a mixture of new protection buying and profit-taking on existing hedges," said Chris Murphy of Susquehanna. "The put share alone doesn't tell you net positioning." Still, the surge in volume and volatility suggests investors are bracing for further turbulence.

Global Spillovers

The shockwave rippled through global markets, especially in semiconductor hubs. Japan's Nikkei fell 6.7%, while South Korea's KOSPI plunged as much as 8.7% intraday, triggering a circuit breaker. Samsung Electronics (KRX:005930) and SK Hynix (KRX:000660) were among the hardest hit. The Philadelphia Semiconductor Index fell more than 12% on Thursday.

Friday brought a tentative rebound. An intraday report showed the Nasdaq Composite up about 1.7% and the S&P 500 up roughly 1%, led by recovering chip stocks. But it remained unclear whether the bounce would hold. "The key question is whether this is just a trading rebalance or a lasting reassessment of AI investments," said Steve Sosnick of Interactive Brokers (NASDAQ:IBKR).

Economic Backdrop

The selloff occurred against a mixed economic backdrop. Friday's employment report showed 165,000 jobs added in October, far above the 59,000 expected, with unemployment falling to 4.1%. That complicates the narrative of an imminent recession.

Retail investors sold heavily: JPMorgan (NYSE:JPM) data showed $1.3 billion of net selling across stocks and ETFs by 11:30 a.m. Thursday, the largest outflow in a year. Hedge funds with AI exposure also suffered significant losses, according to Goldman Sachs (NYSE:GS). "The market was overdue for a shakeout," said one portfolio manager who declined to be named. "But the speed of the move caught many off guard."

What to Watch

With the VIX still elevated, market participants are focused on whether forced selling will continue. Nomura (NYSE:NMR) estimated that leveraged ETFs would need to sell approximately $47 billion of equities into Thursday's close, the second-largest such estimate in its dataset going back to July 2006. That flow is mechanical and could amplify moves.

Additionally, any concrete AI policy proposals from the incoming Congress will be closely watched. "The market is repricing political risk," said Daniela Hathorn, a European market analyst. "But valuations were stretched, and Treasury yields are high. The AI theme needs to prove it can monetize."

For now, the record options volume stands as a testament to investor anxiety. Whether it marks a bottom or just a pause remains to be seen.

Correction: An earlier version of this article misstated the decline in the Nasdaq Composite. It fell 5.5%, not 5.5 points.