Expect some wild swings in tech darlings Apple and Tesla as Nasdaq's volatility index spikes

• Tesla and Apple have both led the Nasdaq 100 to touch all-time highs, but an indicator is suggesting that investors could face much volatility.
• The Cboe Nasdaq volatility index has increased over 10% in the last five days.
• Just like the VIX, a higher volatility figure reflects increased investor nervousness.
• Both Apple and Tesla enacted stock splits on Monday and markets have been divided whether the stocks could rise further, even though they are near record-highs, or face sharp corrections.
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Apple and Tesla are two tech stock market darlings that have exploded in 2020. Investors large and small have bought up both in record amounts. But as bullish the current environment may be, one indicator is signalling that tech bulls should brace for the unexpected.

The CBOE Nasdaq volatility index, which tracks the volatility of options on the Nasdaq 100 index, has surged by around 50% in the last three weeks, having bumped along in a steady range since mid-May. The index was last up 10% around 40.44, marking a near-two month high as of 11:40 a.m. ET.

Just like Wall Street's favorite "fear index", the VIX, or CBOE Volatility Index, which tracks options volatility for the S&P 500, the higher the value, the greater the investor nervousness.

What is unusual is the Nasdaq volatility index is rising in tandem with the underlying index. The opposite is more usually the case. This would suggest that, while investors are happy to buy up anything from electric vehicle maker Tesla, to Apple, to Facebook, they are not unconcerned about a reversal in the tech sector's fortunes.

The options market also shows that investors are betting heavily on big gains in the Tesla share price. Data for options expiring on Friday shows that the largest position - as measured by open interest - is in call options that give their holder the right to buy Tesla stock at $500 a share.

Tesla's share price is currently around $445, having rallied by more than 400% this year. $500 calls expiring tomorrow have 38,000 lots of open interest, but the second-largest strike is $800 calls, with open interest of over 33,000 lots.

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In the case of Apple, the company just had its its fifth stock split in its history on Monday.

Apple's share price is currently trading around $124.51, 5% lower as of 11:05 am. ET. Its stock has surged 70% since the beginning of 2020 and, based on its market capitalization, is now more valuable than London's FTSE 100 index.

Market watchers have been split whether to applaud the outperformance of technology stocks or caution that a meltdown may be underway, as was the case in the infamous bursting of the "dot-com bubble" in the early 2000's.

Indeed the Nasdaq 100 hit a fresh all-time high of 12,293 on Wednesday. The index is up 37% since the start of the year.

Although Tesla was down 7% as of as of 9:32 am ET Thursday, for Wedbush equity research analyst Daniel Ives, Tesla has a lot more upside.

In the electric-vehicle market, "it's Tesla's world and everyone else is paying rent," Daniel Ives, senior equity research analyst at Wedbush, told CNBC on Thursday, adding he believes the share price has a lot more room to run higher.

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Apple's and Tesla's stock prices could explode by about 33% in the 12 months after their stock splits, multi-asset investment platform eToro said last week.

The firm analyzed 60 years of data and found that, on average, megabrands that split their stocks saw their share prices surge by a third in the year after the split.