MARKET SNAPSHOT

🕒 Market Overview: SPX extends winning streak despite historic tariff-induced volatility.

🔄 Sector Insight: Call options outpacing puts across tech stocks ahead of critical earnings.

💰 Today's Trade Idea: AMZN straddle capitalizes on earnings volatility in uncertain environment.

MARKET BREAKDOWN

Macro Lens – Big Picture Market Forces

Markets continue to stabilize following what can only be described as historic turbulence. After suffering the most significant two-day loss in market history earlier this month, equities have shown remarkable resilience with the S&P 500 extending its longest winning streak since January.

The VIX has retreated significantly from its panic-induced spike but remains substantially above pre-crash levels. This suggests investors haven't completely abandoned their defensive posture as they await critical economic data that could impact the Federal Reserve's upcoming May meeting.

Sector and Stock Watch – Identifying Key Movers

Tech stocks are showing surprising strength ahead of earnings season. Call options are outpacing puts across many big tech names, indicating a cautious optimism that would have seemed unthinkable just weeks ago.

Meanwhile, early data shows cargo shipments from China to the US have plummeted dramatically since tariff implementation. This supply chain disruption creates an asymmetric risk profile between domestically-oriented businesses and those dependent on international supply chains.

Trading Strategy in Focus – How to Play the Market

For options traders navigating this complex landscape, several approaches merit consideration. Earnings volatility plays offer compelling risk-reward profiles, particularly in tech names reporting this week.

Calendar spreads look increasingly attractive given volatility's term structure, with near-term expirations commanding significantly higher premiums than longer-dated ones. This setup suggests the market expects clarity to emerge over time.

SMART TRADE IDEA

Long Straddle on AMZN

Trade Setup:

• Buy 190 Call / Buy 190 Put, May 16, 2025 expiration

Entry Price and Risk Reward:

• Cost: $16.00

• Max Profit: Unlimited on the upside above $206, unlimited below $174 on the downside

• Breakeven: $174 and $206

Management Plan:

• Exit at 50 percent loss, roll up if AMZN shares reach $220

Open This Trade Instantly with Trade Link on Tradier Brokerage!

NOTE: Remember, options trading involves substantial risk and is not suitable for all investors. Consider your investment objectives, financial resources, and experience level before implementing this or any options strategy.

DISCLOSURE: Trade recommendations may have changed since publication. Evaluate current market prices and risk/reward before acting. Trading involves significant risk and is not suitable for everyone. This is not personalized investment advice. Past performance doesn't guarantee future results. Publisher and contributors may hold positions in recommended securities. Readers assume full responsibility for their trading decisions. Consult a financial professional before investing.

Markets reflect the geopolitical and economic landscapes, which remain uncertain in late April 2025. The Trump administration's early April tariff announcement shocked the system. While the markets expected a shift in trade policy to level the playing field, the level of tariffs and China's retaliatory response caused significant indigestion from the investment community.

As we learned during significant stock market corrections, the most extreme volatility occurs when surprises hit the system. In 2008, markets did not expect the extent of the U.S. housing and global financial crisis. The 2020 pandemic was an even greater surprise. Russia's 2022 invasion of Ukraine is a third example of how a surprising event ignites price variance in markets across all asset classes. The April 2 "Liberation Day" announcement and tariff levels shocked U.S. trading partners and markets.

With AMZN around the $188 level, the May 16, $190 put and call combo (straddle) is trading at the $16.00 level. A long straddle makes the break-even levels $206 on the upside and $174 on the downside, well within the range from the February 4, 2025, high to the April 7, 202, low. With volatility coming down, the odds favor the upside. Still, any shocks could derail the current market rally, making the downside also attractive in the current environment, where volatility could return in the blink of an eye.

AMZN will announce earnings on May 1, and the company has a long history of exceeding the market's expectations. After earning $1.86 per share last quarter, the current consensus is around $1.37 for Q1 2025, which could be a manageable level for another beat. However, the devil will be in the details as the MAG 7 company's future forecasts will reflect the current trade uncertainty. Meanwhile, AMZN is an 800-pound consumer gorilla, and its shares could roar higher if Q1 earnings are positive and the overall market continues to recover as the tariff fears recede.

I favor the May 16, 2025, AMZN straddle because of the high open interest levels in the $190 put and call strike prices, providing significant liquidity.

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