On June 10, 2026, traders conducted afternoon dealings on the floor of the New York Stock Exchange in New York City. That day, U.S. stocks closed sharply lower across the board, with the Dow Jones Industrial Average plunging more than 800 points. The catalyst was former U.S. President Donald Trump's comments that U.S.-Iran negotiations were "taking too long" and his threat to take more action, which pushed international oil prices higher.
After briefly surging early in the session on Wednesday, major U.S. stock indices were dragged down to close lower as heavyweight technology stocks faced concentrated selling pressure, leading to another significant market decline.
Given the epic bull run in artificial intelligence-related stocks that has now encountered a sharp pullback, it is reasonable to question the likelihood of a major downturn. This is precisely the core metric continuously calculated by options market makers. By filtering for the strike prices of relevant index options and matching the delta values of the contracts, investors can roughly estimate the probability of an index closing in-the-money or hitting a specific strike price.
Standard & Poor's 500 Index
The criteria for a technical bear market is defined as a 20% decline from the closing high of 7610 points, corresponding to a level of 6088 points. According to data from the ThinkOrSwim trading platform, the pricing of put options on this index indicates a 10.5% probability of closing at 6088 points by August 31. The probability of the index touching this level intraday from now until the end of August is typically about double that figure, approximately 21%.
Nasdaq 100 Index
The probability of triggering a deep 20% correction and entering a technical bear market over the same period rises to 32%.
In a telephone interview, Scott Bauer, CEO of Prosper Trading Academy, stated: "A 32% probability of a Nasdaq bear market seems high, while the 21% probability for the S&P 500 seems low. From a volatility perspective, I would short Nasdaq volatility and go long S&P 500 volatility. Sharp individual stock movements impact the Nasdaq more significantly, but such extreme volatility will eventually subside; current volatility levels are already at historical extremes. The market is showing clear signs of 'panic selling from fear of missing out,' with many investors liquidating positions to prepare for participation in the SpaceX IPO."
The implied volatility of the Nasdaq 100 Index is near 33, while that of the S&P 500 is only 22. This difference stems from concentrated selling pressure on leading AI and tech stocks, meaning the Nasdaq, with its heavier weighting in technology, has greater potential for significant price swings, both up and down.
Small-cap stock performance falls between these two. The Russell 2000 small-cap index has a 30-day implied volatility of 29. The probability of this index declining more than 20% cumulatively from now until August 31 and entering a technical bear market is approximately 24%.
The S&P 500's last technical bear market occurred in 2022, dragged down by the Federal Reserve's interest rate hiking cycle, with the index trending downward for about 10 months. During the sell-off triggered by last year's tariff policy announcement, the index's maximum intraday decline once exceeded 21%.
Comments