Put options on semiconductor ETF SMH hit record high amid rally, signaling cautious hedging by traders.

Put option open interest on the VanEck Semiconductor ETF (SMH) has surged to nearly 1.7 million contracts, the highest since the fund's 2011 launch, as semiconductor stocks rally strongly. This rise in puts, along with increased implied volatility nearing 55%, suggests traders are hedging against potential pullbacks rather than outright betting against the sector. High volatility in single chip stocks like Micron makes trading the sector ETF more attractive for hedging. Experts see this cautious positioning as a sign the rally may be sustainable rather than a short-term boom and bust cycle.