South Korea’s KOSPI rose to a record 8,046.78 on Friday after a tech-led rally. AI-linked shares and semiconductors drove the move, before the rise reversed on heavy profit-taking.
Samsung, which makes up about 40% of the index, fell by more than 8.5% and was among the weakest performers. The KOSPI later steadied near 7,500, down about 6.1% on the day.
In the early US session, Wall Street futures traded lower, pointing to a weaker open. The move followed new inflation data this week that was higher than expected, increasing bets on a US rate rise before the end of the year.
The sharp reversal from the KOSPI’s all-time high suggests a major shift in sentiment, making long volatility strategies attractive. We should consider buying straddles or strangles on the KOSPI 200 index, betting on continued large price swings in either direction. The V-KOSPI, the main volatility gauge, has already surged over 45% today to 32.5, its highest level this year.
With Samsung, the index heavyweight, leading the plunge, we see an opportunity for direct bearish plays. Buying puts on major tech components or related ETFs provides downside exposure as this profit-taking could continue. The negative sentiment from the US session, fueled by inflation fears, will likely add further pressure.
The concern from Wall Street is not unfounded, as the latest Core PCE data for April came in hotter than expected at 3.1%. Looking at Fed funds futures, we see the market is now pricing in a 65% chance of a rate hike by September, a dramatic shift from just last month. This aggressive repricing reminds us of the market jitters we saw throughout 2025 when inflation proved stickier than anticipated.
For those who believe the drop is overdone but want to remain cautious, selling out-of-the-money call spreads on the KOSPI is a viable option. This strategy would profit from the index trading sideways or falling further, while capping potential losses if a sharp rebound occurs. This move is also a clear signal for any of us holding long positions in Korean tech to purchase protective puts to hedge against further declines.
