NEW YORK (Reuters) -At a time when investors could worry about tariffs, growth, and shifting Federal Reserve policy, their biggest fear looks to be missing out on further stock market gains, options data showed.

With stocks hitting new highs, traders in the options market are lapping up call options with near-record fervor.

For individual stocks, trading in call options, typically bought to express a bullish view, exceeds volume in puts, options that express bearish views, by the largest margin in about four years, according to a Reuters analysis of Trade Alert data.

"It's all upside exuberance at this point," Greg Boutle, head of U.S. equity & derivative strategy at BNP Paribas, said.

The rush into bullish single-stock options is driving unusual moves in important options-market metrics.

The S&P 500's rally to record highs has knocked the index's one-month volatility to a near-record low of 6.7%, even as investors' expectations for how much individual stocks will swing, as shown by the Cboe S&P 500 Constituent Volatility Index, have climbed to a more than five-month high.

For single stocks, measures of skew, a gauge of demand for downside protection versus upside speculation, have been turned on their head, as typical worries about drops in stock prices have been overtaken by concerns of missing out on further gains.

The share of stocks trading with an inverted skew has risen dramatically over the past few months, Stefano Pascale, head of U.S. equity derivatives research at Barclays, said.

"It's a typical sign of euphoria," Pascale said. 

A BIT LIKE THE LATE 1990S

The Barclays Equity Euphoria Indicator, which measures investor sentiment intensity based on derivatives flows, shows continued heightened bullish sentiment among retail investors.

The one-month moving average of the indicator sits at about 14.3%, nearly three standard deviations above its long-term average. 

Much of this investor optimism is concentrated in the same high-flying names that have driven this year's stock market rally.

"Investor demand for single-stock calls has been extremely strong, especially across AI, semiconductors, and metals," Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, said.

The tech-heavy Nasdaq Composite is up about 19% for the year, compared with a 15% rise for the S&P 500. Meanwhile, AI-linked stocks, including Nvidia and Broadcom, are up about 38% and 45%, respectively.

With the market more than recovering from its April tariff-related swoon, investors have been emboldened to increase equity allocations. Some who were slow to join the rally are now using options to make up for lost time, strategists said.

Strong bullish flows into these names also tend to unleash a virtuous cycle: the more investors buy call options that confer the right to purchase the stock at a predetermined price and time, the more options dealers, who sell those contracts, have to buy the underlying stocks as they move higher to hedge their own exposure.

"We're definitely seeing a lot of that, especially in the AI-related names," Barclays' Pascale said, noting such strong bullish options flows can trigger market dynamics seen during the meme stock frenzy in recent years.

For BNP's Boutle the euphoric trading conditions are reminiscent of "late-cycle exuberance."

"We have this kind of environment that is starting to feel a little bit late 90s-esque," he said, referring to the dot com bubble that burst in 2000.

ARE STOCKS OVERSTRETCHED?

For investors, the key question remains how long these conditions can last.

History shows once an outsized share of stocks starts exhibiting signs of euphoria, it usually heralds diminishing forward returns.

In particular, the Barclays euphoria indicator shows once a stock exhibits these signs for a few sessions, subsequent stock performance is often negative on average.

High levels of euphoria have historically preceded pauses in the market's momentum, a Barclays analysis showed. 

"If you're starting to see overstretched positions and evidence that there is euphoria ... it's kind of bad news," Pascale said.

CHASING THE MARKET, GUARDEDLY

Still, there is no telling exactly how long these conditions can last.

"One of the lessons we learned from the late 90s is that even if you think it's a bubble ... these things can run a lot harder, a lot faster, and being short too early or uninvested can equally be very painful," BNP's Boutle said.

That leaves investors aiming for a balance between chasing the rally further and ensuring their portfolios can weather a turn in market sentiment.

"We speak to people at the moment as much about hedging the upside as we do the downside," Boutle said.