Magnificent Seven company stocks shot off - in different directions.

The grouping of companies called the Magnificent Seven just did something that they haven't since the introduction of ChatGPT sent the market into an artificial intelligence-sparked frenzy.

Each of those companies - except for Nvidia, which hasn't reported results yet- saw a post-earnings move that was greater than what was implied ahead of time in options markets, according to Bank of America equity derivatives strategists.

That's not to say all of the moves were positive, but they were big, with Tesla's $(TSLA)$ stock diving 15% while Microsoft $(MSFT)$ shares stormed 16% higher after results.

Those earnings, plus the blow-up of hedge fund Situational Awareness, as well as the uncertainty stemming from the press conference of new Fed Chair Kevin Warsh, drove U.S. stock dispersion to the highest levels in nearly 35 years, according to Bank of America calculations.

"While tech bubble builds can overcome such headwinds and uncertainty longer-term, shorter-term drawdowns and rotations into value are not unusual," say the strategists.

They have ideas on how to hedge those risks. They say call spreads on the healthcare sector XLV offer up to $4 for every dollar invested, while limiting the downside compared to buying the stocks given that the sector looks overbought.

Call options give the buyer the right to purchase an underlying share at a particular price within a specified time. A call spread is a trade that involves buying one call option and selling another call option with a higher strike price and the same expiration date, a strategy designed to lower the upfront cost of a trade while limiting both potential profits and maximum risks.

Of all sectors or markets, healthcare ranks highest for Bank of America's bubble risk indicator, which combines an asset's returns, volatility, momentum and fragility.

The strategists also point to options plays that could benefit from a "grind-lower" in the S&P 500 SPX, via put spreads or put spread collar variations, "given today's rotation-prone market and the steep put skew."

Puts give the buyer the right to sell the underlying asset at a particular price by a specific time.

-Steve Goldstein