The Iran conflict has sparked tumult in global equity markets, with major indexes in some markets, including South Korea, falling into correction territory.

Yet the major U.S. equity indexes have not only held up, they've been outperforming their international peers since the U.S. and Israel began their bombardment of Iran on Feb. 28. The S&P 500 on Wednesday was trading within 4% of its record high, FactSet data showed, even though the index ended the day down slightly. South Korea's Kospi Composite Index, meanwhile, has fallen more than 10% since the beginning of March. Extreme volatility in Korean stocks has come to resemble a "textbook bubble," Bank of America equity strategists said.

"Closure of the Strait of Hormuz was always considered a true black swan, but we're not getting anything close to the feared responses in a wide range of assets," said Steve Sosnick, chief strategist at Interactive Brokers.

A quick look at action in certain corners of the U.S. equity options market, however, shows something slightly different. Charlie McElligott, a cross-asset strategist at Nomura, pointed out that traders of options tied to Big Tech stocks and an ETF that tracks the Nasdaq-100 appeared to be bracing for "disaster."

"Equities Options Skew (ESP MegaCap Tech / Mag7+) remains insanely tilted towards Downside and OTM 'Crash' Left-Tail Hedges, while 'Nobody owns the Right-Tail,'" McElligott said in commentary shared with MarketWatch on Wednesday.

In financial markets parlance, a "left tail" outcome refers to a major crash. A "right-tail" outcome, on the other hand, would be a big rally.

In a series of charts, McElligott illustrated how demand for out-of-the-money put options tied to shares of the "Magnificent Seven" and the Invesco QQQ Trust QQQ has surged relative to out-of-the-money calls, as well as puts that are closer to the money.

A collage of eight line graphs showing historical percentiles for skew and volatility for "Mag7" and "QQQ" stocks, covering May 2025 to March 2026.

Traders use "out-of-the-money" options to bet on, or protect their portfolio against, a big move in either direction.

Members of the "Magnificent Seven" are Microsoft $(MSFT)$, Nvidia, Amazon, Tesla $(TSLA)$, Apple $(AAPL)$, Alphabet $(GOOG)$ $(GOOGL)$ and Meta Platforms. QQQ aims to track the Nasdaq-100.

Puts and calls give the holder the right, but not the obligation, to sell or buy an underlying asset at a set price, before a certain expiration date. An "at the money" option represents a contract with a strike price at or very close to where the underlying asset is currently trading.

This has created what McElligott described as an asymmetric opportunity for any investor with the temerity to bet on a big rebound. Right now, an investor can sell an out-of-the-money put on any one of a number of popular ETFs, and more than offset the price of a call. The Nomura strategist highlighted the best:

"You can still get nice leverage funding calls by selling lower delta puts," McElligott added.

One thing that might be helping to keep a floor under stocks over the past few days has been investors aggressively monetizing - that is, cashing in - put options they had bought earlier. McElligott thinks this dynamic helped usher in Monday's big reversal, which saw the S&P 500, Nasdaq Composite Index and Dow Jones Industrial Average erase early losses and finish higher.

He said investors aggressively exercised, or sold, put options tied to the State Street SPDR S&P 500 ETF Trust.