Market Volatility, Oil Impacts, and Strategic Opportunities
The potential for a 60-day ceasefire with Iran significantly lowers geopolitical risk, which means we should look at strategies that benefit from falling market volatility. The CBOE Volatility Index (VIX) has already dropped over 10% this past week to near 13.5, suggesting some of this good news is priced in. Selling out-of-the-money puts or put credit spreads on the S&P 500 could be a viable approach to collect premium from this environment. We see this news as directly bearish for crude oil prices in the coming weeks. The Strait of Hormuz is a critical chokepoint for about a fifth of the world’s daily oil supply. Historically, tensions in this region have added a $5-10 risk premium to a barrel of WTI crude, a premium that could now evaporate and pull prices down toward the low $80s.Outlook for Artificial Intelligence and Risk Management
While geopolitical tensions may be easing, we believe the real momentum remains in artificial intelligence. Dell’s massive after-hours surge shows the market’s insatiable appetite for companies powering data center expansion. With the Nasdaq 100 already up over 22% year-to-date, we would use any market dips to add bullish exposure to semiconductor ETFs. However, we must remain cautious as the ceasefire extension is not yet officially signed by the President. The administration’s comments remind us that this deal could unravel, which would cause volatility to spike and oil prices to jump. This is why we prefer defined-risk option strategies, like call spreads on tech stocks, over taking on unlimited risk.Start trading now — click here to create your real VT Markets account.
