The S&P 500 nearly reached its all-time high, closing at 6502, the highest daily level recorded, close to the 6207 peak from August 25. It saw strong buying in the latter part of the session, marking the third consecutive day of robust activity.
The main index changes included a 0.8% gain for the S&P 500, a 1.0% rise for the Nasdaq, a 1.3% increase for the Russell 2000, a 0.8% gain for the DJIA, and a 0.5% rise for the Toronto TSX Composite. Other significant news included discussions on tariffs and trade agreements involving the US.
Risks in Foreign Exchange Trading
It is critical to remember the risks inherent in foreign exchange trading, including potential for loss greater than the original investment due to leverage. Prospective traders should evaluate their investment goals and risk tolerance, avoiding investments beyond their financial capacity.
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With the S&P 500 hitting its highest-ever closing level at 6502, the upward momentum is incredibly strong. This sustained buying pressure, seen for three consecutive days into the close, suggests we should consider riding this trend with near-term call options. A clean break above the all-time intraday high could trigger another leg up.
The most immediate risk is Friday’s non-farm payrolls report, which is notoriously difficult to predict. We’ve seen in the past, like the sharp market drop after the disappointing May 2025 jobs report, how a significant miss can instantly reverse sentiment and create a 1.5% swing in minutes. This makes buying straddles or strangles on major indices a viable strategy to play the expected volatility spike.
Renewed Threat of Tariffs
Looming over the market is the renewed threat of 15-20% tariffs on European goods. We remember how similar trade tensions in the 2018-2019 period led to sharp, unexpected drawdowns, with the VIX volatility index spiking above 30. With the VIX currently trading near a low of 12, it is relatively cheap to buy longer-dated puts on the SPY or VIX calls as a portfolio hedge.
Mixed economic data, with a strong ISM services report and a soft ADP employment number, creates uncertainty for the Federal Reserve. Fed official Goolsbee is speaking soon, and any change in tone could reprice rate expectations and increase volatility in the bond market, which would spill over into equities. We need to be wary of how rising yields could challenge the current high valuations in the tech-heavy Nasdaq.
Overall, while the trend is positive, complacency seems high, with the CBOE equity put-call ratio recently falling to 0.65, a level often seen near market tops. This suggests that downside protection is unloved and therefore inexpensive. We should use this opportunity to either sell covered calls against existing long positions or buy puts on sectors most exposed to European trade, such as industrials.
