IGV’s Unusual Options Activity Suggests Software Stocks Are at a Crossroads. Time to Be Bullish or Bearish?

Markets were higher on Wednesday, with all major indexes trading higher. The S&P 500 gained 0.5%, the Nasdaq 0.6%, the Dow 0.6%, and the Russell 2000 1.2%.

That is a remarkable feat given the current state of the world. It’s hard to believe that the four-year-old Ukraine/Russia war could move forward in the news, but that’s exactly what happened because of the war in the Middle East.

While wars were the big story in 2026, software stocks managed to attract a lot of attention; most of it is negative, as investors worry about software stocks being rendered ineffective by AI.

As a result, ETFs like the iShares Expanded Tech-Software Sector ETF (IGV) have attracted a lot of attention in the year so far. On Wednesday, the April 10 $86 IGV call had the eighth highest Vol/OI (volume-to-open interest) ratio at 26.25.

Although call volume accounts for less than 10% of the ETF’s total value and only 4.3% of its 30-day average of 104,520, its unusual options activity suggests that IGV is at a crossroads. The question is whether the call is bullish or bearish.

Here’s my two cents.

If you’re not familiar with IGV, it tracks the performance of the S&P North American Expanded Technology Software Index, a collection of 113 companies, all but four (Canada) based in the US.

Most of the items are software stocks with a focus on interactive home entertainment and interactive media and services businesses. The average market cap of the index is $5.26 billion. By weight, Palantir Technologies (PLTR) is the highest at 9.29%, while Rapid7 is the lowest at 0.01%. The top 10 funds account for 61% of the ETF’s total assets of $10.65 billion.

IGV decreased by 24.82% in 2026. You have three years out for a nice return of 31.93% as of March 27, 2023. Since hitting a record high of $117.99 on September 1, 2025, IGV has lost a third of its value.

I’m not enough software industry experts to know whether or not AI is the industry’s kryptonite. However, I find it hard to believe that large caps are the same Microsoft again Intuit they won’t see how they can use AI to their advantage, so I believe IGV presents a value opportunity at current prices, but that doesn’t mean it doesn’t have more room to fall in the remainder of 2026. That depends on the geopolitical movement that is happening at the moment.

The 5-year chart below highlights why IGV is at a crossroads.

Source: Barchart.com

IGV’s share price in the past five years has fallen below its 200-day moving average (MA) on two occasions: May 2022 (left arrow) and Feb. 2026 (right arrow). In the first period, it briefly moved back above the 200-day MA, but then returned below that August; then it stayed below for nine months until mid-May 2023. Until the end of February, it remained above the 200-day MA. As I write this in early trading on Thursday, IGV’s share price is about 25 cents below its 200-day MA.

So, is IGV ready to continue a nine-month trade below the 200-day MA? That is the million dollar question.

As I mentioned in the introduction, IGV’s April 10 $86 call traded 4,489 contracts yesterday, 26.25 times its open interest. The bottom three trades accounted for 92% of the call strike total.

As you can see from the trade prices, two of the three were at the asking price of $0.95. That is generally considered bullish. If traders went looking for something closer to the bid price of $0.65, that would be a more bearish indicator. The rest of the trade was 10 cents above the $0.80 average, so it was bullish again.

Within six minutes of opening this morning, one trade of 2,286 10 $86 call contracts was over $0.50, down from yesterday’s trade of $0.95. With shares down $1.26 from $82.21 yesterday, the lower ask makes sense. It should make a big move to ITM (in the money) on April 10th.

Although the trading price this morning is down 45 cents from the three from yesterday above, it is 45 cents above the bid price of $0.05, 15 cents higher than yesterday’s spread, which means, at least based on one trade, that traders have found more bullish.

The expected move is $4.08 (5.1%). Based on the $81.05 share price, the high price would be $85.13, not the $86 strike. However, with a delta of 0.1731, and considering the expected move, if you had sold to close before April 10, your call price would have been $0.71 higher [$4.08 expected move * 0.1731]a return of 142%. Annualized, that’s 3,455.3% [142% return * 365 / 15 DTE].

Not too shabby.

Referring to the 5-year chart from the beginning, the first IGV dropped below the 200-day MA, losing 49% of its value from peak to trough in 11 months. As mentioned, its share price is down 33% from its all-time high last September.

So, if the draw is the same height and depth, IGV could fall another four months and lose another $20.79 [$80.96 share price – ($117.99 * 49%)] in the system.

Of course, the call expires in just 15 days, with an expected move of about one-fifth of my projected downside within four months, so losses would be limited to $50 per call from today’s trade or $95 for three calls from yesterday. That’s much less than the $408 loss you’d get if you actually bought 100 shares of IGV.

What happened in 2022 that caused the big drop? High interest rates led to a rebound in software stocks and IGV, which had a three-year period from 2019 to 2021, generating an annualized return of 33.2% over that period, according to Morningstar. Add in stubborn inflation, which has fueled talk of recession, and in retrospect, you’ve got your answer.

In this case, the threat of obsolescence has brought software stocks to their knees. The question for investors is whether we are at the bottom.

After a significant one-year decline in IGV between November 2021 and November 2022, its P/TBV (physical book value) multiple went from 1.17x to 0.75x, a 36% decline. The current P/TBV multiple is 0.78x, almost identical to its November 2022 low.

Since the ETF’s inception in July 2001, the average annual P/TBV multiple for IGV has decreased only once: 2002, 16 months into its existence, by 0.77x.

I don’t know about you, but if you’re an investor, it should be very hard to resist buying IGV at current prices.

So, three strategies to consider: 1) Buying $86 calls, maybe going slower on DTE than 15 days, 2) Making Covered Calls by buying stocks at current prices and selling $86 April 10 $86 calls for a small profit, or 3) Make a Bull Call Spread, buy the April 10 call and call the bet $78 that is shown below.

The total deduction of $3.95 gives you a discount of $81.95. Stocks must gain only 1.5% in the next 15 days to do so; there is a 41.7% chance that it will happen. The most you can lose is $395, and the most you can win is $405. That gives you a risk/reward of less than 1.0 and a high return of over 100%. A very good balance.

It is a bet to make if you are slightly bullish in the near term.

As of the date of publication, Will Ashworth had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com