MARKET SNAPSHOT

🕒 Market Overview: Trump administration signals major reduction in Chinese tariffs, triggering market volatility.

🔄 Sector Insight: Tech stocks, especially semiconductors, showing highest sensitivity to tariff news.

💰 Today's Trade Idea: Long straddle on TXN capitalizes on semiconductor volatility.

MARKET BREAKDOWN

Macro Lens – Big Picture Market Forces

The market is digesting a significant policy reversal as the administration signals substantial reductions to the current Chinese import tariffs. This unexpected pivot from previous hardline positions has injected fresh volatility into stocks while creating specific sector opportunities.

Volatility indicators have responded dramatically, with options trading reaching unprecedented volumes as traders seek both protection and profit potential. The rapid policy shifts demonstrate how quickly market sentiment can change with unexpected headline risk.

Sector and Stock Watch – Identifying Key Movers

The semiconductor sector stands out as particularly sensitive to these tariff developments given its complex global supply chains and China exposure. Texas Instruments jumped after strong quarterly results, signaling potential resilience despite broader market uncertainty.

Meanwhile, ServiceNow surged following impressive earnings while Southwest Airlines dropped on booking concerns. These earnings-driven moves highlight how company fundamentals are intersecting with broader tariff anxiety.

Trading Strategy in Focus – How to Play the Market

Short-term options strategies, particularly Zero Days to Expiration (0DTE), have become the weapon of choice for many traders looking to capitalize on the policy-driven market swings. These instruments allow for precision timing when announcements can trigger immediate market reactions.

For those seeking a more measured approach, sector rotation strategies targeting industries most exposed to tariff changes could prove effective. The volatility environment suggests above-average price movements in coming sessions, creating both risk and opportunity.

SMART TRADE IDEA

At-the-Money Straddle on TXN

Trade Setup:

• Buy 170 Call / Buy 170 Put, May 16, 2025 expiration

Entry Price and Risk Reward:

• Cost: $1,407 per straddle

• Max Profit: unlimited above $184.07, limited to $153.93 on the downside below $153.93

• Breakeven: $184.07/$155.93

Management Plan:

• Exit at 50 percent loss, take profits at 50 percent gain

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.

Stock market volatility is a nightmare for passive investors. Still, it creates opportunities for flexible and nimble traders who keep their fingers on the pulse of the changing sentiment and market price action. Markets have experienced a lot of price variance in April, and that volatility likely continues in May and beyond.

The SOXX ETF tracks the SOX index, a capitalization-weighted index comprising the 30 largest U.S.-traded companies primarily involved in the design, distribution, manufacture, and sale of semiconductors. The ETF's most recent top holdings include over 7.5% exposure to Texas Instruments (TXN) and exposure to the other leading semiconductor manufacturers. Thus, there is a significant correlation between TXN and the SOXX ETF.

As the chart shows, TXN shares have traded in a wide range of $139.95 to $220.38 over the past year. At around $161 per share, TXN is currently near the bottom end of the trading range.

The chart shows that the long $170 TXN straddle, expiring on May 16, 2025, is currently trading around the $14.07 per straddle level with TXN around $161 per share. Considering the breakevens are $184.07 on the upside and $155.93 on the downside and are within the trading range since the November 8, 2024, high, the straddle offers good value if market volatility in the semiconductor sector continues.

TXN has been a volatile stock, and the trade environment will likely support continued price variance. A long straddle can be the optimal approach to volatile stocks as it allows for significant price moves on the upside and downside.

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