Why call options could be the smart play in today’s overvalued stock market
Stock markets remain at historically high valuations, yet volatility stays surprisingly low. Thorsten Eberhart, a market analyst, argues that this mix creates an opportunity for a specific trading approach. He suggests that buying call options could now be a strategic move—offering outsized gains with limited upfront cost.
Current market conditions show a striking contrast between price levels and investor calm. The S&P 500’s Shiller CAPE ratio sits at around 40x, more than double its long-term average of 17.67x. The NASDAQ 100 is even more stretched, with its CAPE ratio jumping 53.5% in three years to 52.56x.
Eberhart’s case for call options rests on two key factors: stretched valuations and suppressed volatility. The approach allows traders to gain market exposure without committing full stock market prices. Yet the potential for total loss remains if the options fail to pay off by expiry.
