June 9, 2025
Weekly Update
The S&P 500 broke back above the 6,000 level for the first time since February last week as the indexes are now within striking distance of their all-time highs (though they do have some work to do). By week’s end the S&P 500 had gained 1.5%, the Dow had rallied 1.2% and the Nasdaq had advanced by 2.2%
What Traders are Saying
Following my write-up on the Robinhood (HOOD) situation and the expectations that the stock would be added to the S&P 500 I received two great questions from subscribers. Here are those questions and my answers.
Question: I was wondering what you thought of the trade below on HOOD since this could be pretty impactful news that would trigger a big stock move.
A buy of a straddle 30 days out expiring on July 3 has an expected stock movement of $13+/-, within the one standard deviation, considering the implied volatility (would be) in the 66 range.
Would you consider buying a straddle?
Jacob: Let me start here ... that straddle buy, which for those that don’t know is a buy of a call and put on the same strike looking for stock volatility, could work for sure.
However, I would expect (total guess) HOOD to rally or fall approximately $3-$5 on this S&P 500 news, so a $13 straddle would not be the way I would play it.
Again, the straddle might work for any number of reasons, but I don’t anticipate a $8-$15 stock move on this news.
Question: Quick question for my own learning purposes … I had always thought that options expired at the market close. But is that not the case? This buyer of HOOD calls expiring this Friday (is) anticipating a move after market close to your comment on potentially joining the S&P.
Jacob: It’s a good question. So, there are two ways that a weekly trader could win ...
First, if the trader knew that rumors were circulating about the S&P 500 inclusion, it was a cheap shot that the rumors would spark a stock rally.
Second, the trader has until 5:30 eastern to exercise his option on Friday. So, if it was announced Friday after the close that HOOD would be added to the S&P 500 he can then choose to exercise (or not) those calls by 5:30, and take ownership of the stock based on the inclusion/not.
Stepping back, the S&P 500 somewhat caught traders by surprise and did not adjust the components of the S&P 500, meaning HOOD was not added, and in pre-market trade this morning the stock is trading lower by $3.50 (not the end of the world for our position).
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 17.5 which is its lowest level since before the tariff situation blew up. And further on the VIX, via @VIXandMore on Twitter/X:
“While the VIX is under 18, it is worth noting that all the VIX futures from 3 months to 9 months are over 21, so investors believe the current lull in volatility is temporary and not at all what we should expect for the balance of the year.”
Essentially, the VIX isn’t pricing in too much concern in the short term, but longer-term traders expect increased volatility. However, I would note this is a pretty normal situation as traders always assume there will be more volatility and risk the further out in time.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 6
Wednesday – 5
Thursday - 5
Friday – 5
Events for the Week to Come
This week has plenty of big events as today trade officials from the U.S. and China are expected to meet (buckle up!) and later in the week traders will be watching for inflation date via the Consumer Price Index (CPI) on Wednesday and the Producer Price Index (PPI) on Friday.
On the earnings front it will be a bit quieter as Oracle (ORCL) on Wednesday and Adobe (ADBE) on Thursday are the only two big announcements for the week.
Open Positions
CSX (CSX) January 32.5 Calls – As I noted on Friday there was a research note from Wells Fargo noting that M&A in the rail space could heat up this year, which is likely (though no guarantee) why CSX has seen such big call buying.
Freeport-McMoRan (FCX) November 43 Calls – FCX broke out to a multi-month high last week and option activity continues to point to higher prices in the months to come, including this trade late last week:
Thursday - Buyer of 5,000 Freeport-McMoRan (FCX) January 60 Calls for $0.83 – Stock at 42.5.
Grab Holdings (GRAB) January 5 Calls (exp. 2027) – GRAB closed above 5 late last week, and maybe/possibly this will finally be the time the stock breaks free of this level. And on that note, option activity has been very bullish.
Marvell (MRVL) June 115 Calls – Our MRVL calls are almost surely headed to expiring worthless in two weeks.
Starbucks (SBUX) January 110 Calls – SBUX showed some signs of life last week closing at 90 on Friday. As I’ve noted, option activity has remained bullish throughout the choppy action of the last month looking for the stock to get going.
Robinhood (HOOD) December 50/95 Bull Call Spread – See “What Traders are Saying” above for an in-depth look at HOOD.
Uber (UBER) December 90 Calls – UBER came alive late last week following the Twitter battle between President Trump and Elon Musk since it’s possible the fight could slow down Elon’s move into autonomous cars and robotaxi technology to compete with UBER. Regardless, option activity in UBER and LYFT heated up Thursday and Friday, including this trade:
Thursday - Buyer of 5,000 Uber (UBER) June 90 Calls for $1.35 – Stock at 85.5.
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