Traders are starting to worry that the bull market in semiconductor stocks is cracking. how to protect yourself

Option traders were buying a lot of protection. iShares Semiconductor ETF (SOXX) on tuesday. The put traded at 74,468 contracts, 1.5 times its 20-day average volume. The options market mirrors what is already seen on the charts. This rally is a roller coaster.

of Korea KOSPI IndexThe company, a pre-eminent agent for the global hardware and memory supply chain that feeds this deal, has suffered drawdowns of more than 10% at least three times this year, with each session compressed to three or fewer. One of them was down nearly 20%. The return Cicada has seen is impressive, more than 300% from its 2025 low to this month’s high, but it’s not without risk.

What bothers me is that I’ve seen some epic rallies before. While this move is not as drastic as the one that led to all-time highs before the 2000-2002 tech disaster (the PHLX Semiconductor Index rose almost twice as much as we saw today), it does remember volatility starting to rise along with prices, as we have observed this year. I remember when the S&P 500 actually first came out on top at the end of 1999, while tech stocks continued to rise for several more months until the bear market began. The S&P hit its all-time high on June 2nd.

If the semifinals are going up in smoke like the Nasdaq did a generation ago, the next leg could be faster and steeper than anyone’s position. For a clue as to how steep these drawdowns are, look at what happened earlier this month.

This is where put spreads can be profitable. Buying outright puts on stocks with SOXX’s volume is expensive, especially since the sector’s volatility has doubled since the beginning of the year. Selling a low-strike put against the harvest can significantly reduce costs while providing meaningful insurance during severe downdrafts.

The August 570/450 put spread pays out at approximately 3:1 and costs just over $31, which is about 5% of the underlying asset. It’s not cheap insurance. But it’s also not expensive, given the speed of movement already seen in this complex.

This trade is not a bet that the semifinals will be a bust. If that happens, you won’t be the only one carrying the bag.