Insights 
VT 
Technology Stocks Gains
Technology stocks saw gains, with Nvidia up 4.16%, Broadcom up 9.43%, and AMD up 3.58%. Other notable rises included Arm at 7.40%, GameStop Corp at 5.26%, Taiwan Semiconductor at 4.76%, and Super Micro Computer at 4.56%.
US Treasury yields decreased in anticipation of a 10-year note auction. The 2-year yield dropped to 3.527%, the 5-year yield to 3.581%, the 10-year yield to 4.047%, and the 30-year yield to 4.698%.
In commodities, crude oil rose by $1.23 to $63.86, gold increased by $23.90 to $3,647.56, and Bitcoin climbed by $2,388, reaching $113,919.
The powerful rally in tech stocks, particularly in semiconductors like Nvidia and Broadcom, suggests we should maintain bullish exposure to the NASDAQ 100. Buying near-term call options on tech-focused ETFs can capture this upward momentum. Given the strong forecast from Oracle, this sector-specific strength seems poised to continue for the next few weeks.
However, the divergence between the rising NASDAQ and the falling Dow Jones Industrial Average signals a narrowing market. This split, where tech outperforms industrials, has been a recurring theme since the AI boom of 2023-2024, often preceding broader market volatility. We should consider buying put options on industrial or small-cap ETFs to hedge against weakness outside of the tech sector.
Opportunities For Volatility Trades
This market split is creating opportunities for volatility trades, as the VIX has been climbing and recently touched 19. A pairs trade, going long NASDAQ futures and short Dow futures, could effectively play this divergence. This strategy profits from the relative outperformance of technology over the broader, old-economy stocks.
The decline in US Treasury yields, even with crude oil rising, points to growing concerns about economic growth. Recent Fed commentary has hinted at a pause, and last week’s August CPI report showed core inflation remains stubbornly high at 3.8%. We can use options on long-duration Treasury ETFs to bet that yields will fall further if the market continues to price in an economic slowdown.
The surge in gold to over $3,600 an ounce, alongside a rising Bitcoin price, shows traders are actively seeking inflation hedges and alternative stores of value. This demand is likely to persist as long as inflation remains a concern. We can use call options on gold and oil ETFs to profit from this clear trend in commodities.
In Europe, the mixed performance with Germany’s DAX falling while Spain’s Ibex rallies suggests a fragmented outlook. It would be wise to avoid broad European index bets. Instead, we could use derivatives to isolate country-specific trends, such as shorting the export-heavy DAX while remaining neutral on southern European markets.
