According to the Wise Finance app, options investors are pouring into the US stock market in droves betting on higher-risk stocks, supporting the upward trend of US stocks amidst subsiding worries about the presidential election and expectations of continued Republican control of Congress next year.

Investors bullish on stocks are involved in a wide range of assets, from electric car manufacturer Tesla (TSLA.US) to small-cap stocks and regional banks. Since the election on November 5th, these assets collectively drove the S&P 500 index up by 3%.

Garrett DeSimone, Director of Quantitative Research at OptionMetrics, said: "We have escaped from this massive risk. It is comprehensive... Everything is rising except bonds."

Ahead of the election, options traders adopted a defensive posture to hedge against potential volatility related to the election, including concerns about delays in results or disputes over the outcome being too close to call.

Now, many are shifting towards a bullish stance, fearing underperforming the market. With the bounce in the market following Trump and Republicans holding control of both houses of Congress, the post-election rebound is a common expectation, including Wednesday's Edison Research forecast, based on the expectation that this outcome will provide Republicans more freedom in advancing their economic agenda, including tax cuts and deregulation.

Charlie McElligott, Managing Director of Nomura Securities Cross Asset Strategy, stated in a report earlier this week that investors are "panicked chasing stocks at all-time highs."

Data from Trade Alert shows that the daily trading volume for call options compared to put options is at a ratio of 1.5 to 1, as opposed to 1.3 to 1 at other times this year.

According to data from Deutsche Bank, the net call trading volume of most sectors' single stock options has significantly surged after the election.

More broadly, there has been a huge change in the volatility landscape, with the Chicago Board Options Exchange Volatility Index (an indicator of portfolio protection demand) dropping to a nearly four-month low of 13.67.

Michael Thompson, Co-Portfolio Manager of the small investment firm Little Harbor Advisors, stated: "The market's concerns about volatility have not materialized, so all excess worries have been eliminated by the market."

McElligott pointed out an increase in demand for a range of call options, including iShares Russell 2000 Index ETF (IWM.US), ARK Innovation ETF (ARKK.US), SPDR KBW Regional Banking Index ETF (KRE.US), and VanEck Semiconductors Index ETF (SMH.US).

In Tesla's options, one can clearly see the market's shift from concerns to bullish speculation. As Tesla's stock price soared after the election, investors rushed to buy options, betting that the close relationship between CEO Musk and Trump could benefit this electric car manufacturer.

Nomura Securities' data shows that in terms of nominal value, Tesla's options accounted for approximately 30% of Monday's total stock options trading volume in the USA.

Analysts state that investors heavily purchasing call options may help drive stock prices higher.

DeSimone from OptionMetrics stated: "When you see these investors flocking to call options... this information gets into the stock, and then you will see the stock itself rise."

Cautiously optimistic.

Of course, as the time and implementation details of the Republican policy agenda become clearer, the so-called Trump trade may encounter setbacks. Investors are also concerned that some of Trump's economic policies, such as tax cuts and tariffs, may trigger inflation.

Some of these concerns are reflected in the recent rise in US Treasury yields, and if this situation continues, it may pose obstacles to the stock market.

On Thursday, US stocks fell after Federal Reserve Chairman Powell stated that, given the strong economy, there is no need for the central bank to rush to cut interest rates. He added that the impact of Trump's policies on economic growth will not be clear until new laws or executive orders are approved or issued.

This may be one of the reasons why some indicators measuring investor enthusiasm have not yet reached the optimistic levels seen in previous market rebounds.

For example, a skewness indicator for the S&P 500 Index – which measures the relative demand for buying call options versus selling put options – has dropped from 7% before the election to 4%, indicating a decrease in investors' defensive awareness. But at various times this year, this indicator has been even lower, including May, when it was 3%.

DeSimone said, 'This suggests that the market is maintaining a degree of caution rather than complete complacency.'