April 10, 2025
China Tariff Deal Trades?
Yesterday the market had its somewhat expected “rip your face off” rally as the tariff situation cooled off. By somewhat expected, I mean at some point the market was going to bounce back, and there was the potential for an explosive move higher as sentiment and positioning had swung wildly bearish. And now that the big rally has happened, what the market does in the next couple days is going to be super interesting. Essentially …
Into this rally, are the bears going to again step in and pound stocks lower? The market is down today, though for now at least it’s not a horror show.
Or …
Was yesterday’s big move higher just day one of a big rally, and if it is, the short covering/chasing of stocks could be epic!
Unfortunately, my crystal ball is in the shop for repairs (as usual), so I, like most traders, can’t say with high conviction which way the market will go when it’s moved 5% or more for five straight trading days.
And while I don’t have high conviction in the direction of the market, I continue to watch option activity closely, which brings me to bullish trades made in Alibaba (BABA) and Nike (NKE) today. Here are those trades and then my thoughts:
Buyer of 1,000 Alibaba (BABA) June 70 Calls (exp. 2027) for $48 – Stock at 107
Buyer of 1,200 Alibaba (BABA) September 110 Calls for $12.95 – Stock at 106
Buyer of 1,000 Nike (NKE) September 70 Calls for $1.60 – Stock at 55
Buyer of 1,500 Nike (NKE) August 57.5 Calls for $5 – Stock at 55
These trades are somewhat interesting as BABA and NKE have been crushed as of late, along with all stocks that have China exposure. And maybe on the heels of positive tariff developments yesterday, perhaps the China tariff war may be next to cool off.
However …
I do want to note that I am not yet picking up on large scale bullish option activity in stocks like China Internet ETF (KWEB) or Pinduoduo (PDD) etc. which would give me much more intrigue about a China trade deal, also, these BABA and NKE trades are targeting moves higher in Summer/Fall.
April 8, 2025
Potential Bullish Signs
Last Thursday and Friday were a total debacle for the market as the S&P 500 fell approximately 10% in two days.
Then, yesterday, the indexes opened lower by another 4% and it again felt like stocks were headed towards another total disaster. Fortunately for the bulls the buyers stepped in and the indexes finished the day mostly unchanged (though there was a wild 6% swing intraday in a matter of seconds on tariff rumors).
So where do we go from here?
Truly no one knows as the market is up today, though that could all evaporate if there is another negative tariff headline.
And while making market predictions isn’t my game, tracking hedge fund and institutional option activity is where I turn to get a feel for the market. And yesterday and today I’ve picked up on two trends which signal we could be getting close to a market turnaround. This is what I mean …
Yesterday put selling was a major theme in the options world as traders somewhat aggressively sold puts, which is a sign that the hedge funds/institutions are willing to buy stocks should they continue to fall. Here is a small sample of that put buying:
Yesterday
Seller of 4,200 Broadcom (AVGO) May 125 Puts for $5.20 – Stock at 150
Seller of 1,500 Airbnb (ABNB) September 110 Puts for $15.75 – Stock at 105
Seller of 3,600 Palantir (PLTR) June 45 Puts (exp. 2026) for $6.50 – Stock at 77.5
Seller of 1,000 Robinhood (HOOD) January 35 Puts for $8.80 – Stock at 35
Seller of 1,200 Meta (META) March 500 Puts (exp. 2026) for $66.50 – Stock at 517
Seller of 1,000 Texas Instruments (TXN) October 150 Puts for $16.30 – Stock at 154
Fast forward to today, and I am picking up on a second bullish theme, which is longer-term call buying in market leaders. Here are those trades from this morning:
Today
Buyer of 4,400 Nvidia (NVDA) January 105 Calls (exp. 2027) for $29.50 – Stock at 105 ($13 million call buy)
Buyer of 600 ServiceNow (NOW) January 740 Calls (exp. 2027) for $205 – Stock at 773 ($12 million call buy)
Buyer of 2,500 Amazon (AMZN) January 175 Calls (exp. 2027) for $44 – Stock at 183 ($11 million call buy)
Buyer of 6,300 Applied Materials (AMAT) January 135 Calls (exp. 2027) for $36 – Stock at 139 ($22 million call buy)
Buyer of 800 ASML (ASML) January 620 Calls (exp. 2027) for $150 – Stock at 628 ($12 million call buy)
So, is this an all-clear? I would say not necessarily as the put sellers are willing to buy stocks lower, and the call buyers are looking for a longer-term turnaround out to 2027.
That being said, these are definitely two encouraging signs amidst the horror show that has been the market in early 2025.
April 7, 2025
Weekly Update
It was a historic week for the market, and not for any positive reasons as the S&P 500 fell 9.1%, the Dow lost 7.9% and the Nasdaq declined by 10%. Perhaps the weekend will give traders a bit of time to better digest the tariff news and the market will stabilize this week, OR, it’s also possible that the uncertainty is just too much for traders to digest.
Stocks on Watch, Events for the Week to Come, What Traders are Saying
While I can list several macroeconomic events to come this week, let’s be real: tariff headlines and rumors will almost surely move the market as much as anything this week. Should be “fun.”
In terms of stocks on my watchlist, it was certainly a cross-off-the-list type of week. For example …
PLTR held 85 all Thursday despite the brutal sell-off. However, by Friday the stock had melted down with the rest of the market and closed the week at 74.
Same story with UBER, which held 70 nicely on Thursday, but then got hit hard on Friday along with most stocks, closing Friday at 65.
GE I loved as it held 200 for weeks before getting nailed Thursday and Friday and closing the week at 167.
And while I don’t have many stocks on my watchlist (at all), IF I start to get the feeling that the selling is overdone, we may take a stab at a bullish position in one of the indexes. And while I generally don’t play with the Russell 2000 (IWM), if the market turns higher, I’m guessing the hard-hit IWM, which has been leading the indexes lower, has the potential to explode higher as it’s sooo unloved.
Finally, I do want to note that 10-20% market declines happen almost every year (though this one was extremely fast). And historically, every steep market decline, for one reason or another, was a great buying opportunity, via @DividendGrowth on X:
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 45, which was a massive spike for the fear index. And while the VIX at 45 feels high, in reality, with an approximate decline of 10% in two trading days for the S&P 500, which has only happened a handful of times in history, and with plenty of uncertainty for tariffs, the economy and more, the VIX might be cheap.
Finally, I do want to note that the VIX at 45 implies a move of approximately 2.8% every day for the S&P 500, which is below the moves the index moved on Thursday and Friday of last week (though I doubt the market will continue to move so aggressively for more than another couple days/weeks).
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Thursday – 5
Friday – 5
Open Positions
Freeport-McMoRan (FCX) November 43 Calls – I seemingly couldn’t have bought this position at a worse point … such is trading in a wild environment. There will be mistakes in such wild times and for now at least this buy was extremely poorly timed.
Grab Holdings (GRAB) January 5 Calls – Having held up very well for weeks, the selling late last week was just too much for GRAB and the stock fell hard. I do believe if the market can get off its knees GRAB stock could rebound quickly, but for now the sellers are in control.
Marvell (MRVL) June 115 Calls – MRVL is still horrible. Not much more to add as the AI/Semiconductor theme is under a ton of pressure.
Financials ETF (XLF) June 50 Calls – On Friday I sold a second piece of our XLF trade as the financials, along with every other sector, were under intense pressure. And while the XLF certainly could spike back to life if the market gets in gear, June expiration isn’t so far away at this point and as always, I sell those stocks first that are closest to expiration.
Jets ETF (JETS) January 26 Calls (exp. 2026) and Starbucks (SBUX) January 110 Calls – There are no clearer signs of a potential recession and consumer pain than the STEEP decline in the JETS and SBUX as of late. Somewhat scary stuff … though we may look back on these stock declines as traders “selling first, asking questions later” months from now.
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