October 6, 2025
Weekly Update
Despite the worries surrounding the government shutdown the market continued its winning ways last week as the S&P 500 and Dow both rallied 1.1%, and the Nasdaq added 1.3%.
What Traders are Saying and Volatility
While the government shutdown is a “worry” for the market, most traders aren’t too concerned about it just yet. Perhaps part of the reason for the lack of angst is that historically the market has handled these short-term shutdowns well, as noted below via Bloomberg and Edward Jones, who look back at the last five such occurrences:
And while most traders aren’t yet too concerned about the shutdown, should it continue for a couple more weeks I expect it could cause some issues for the market, which might explain the rush for calls in the pharma space last week, as noted below:
Buyer of 4,000 Pfizer (PFE) January 27.5 Calls for $1.28 – Stock at 27
Buyer of 10,000 Bristol Myers (BMY) November 48 Calls for $1.70 – Stock at 47 (rolled back from November 52.5 calls)
Buyer of 5,000 Pfizer (PFE) January 26 Calls for $1.65 – Stock at 26.35
Buyer of 13,000 Pfizer (PFE) January 30 Calls for $0.48 – Stock at 26.4
Buyer of 5,000 Pfizer (PFE) June 32 Calls for $0.85 – Stock at 27.3
Buyer of 7,000 Healthcare ETF (XLV) January 150 Calls for $1.63 – Stock at 141
Buyer of 1,000 Eli Lilly (LLY) June 940 Calls for $48 – Stock at 810
Buyer of 6,000 Johnson & Johnson (JNJ) April 185 Calls for $10.40 – Stock at 184
Buyer of 10,000 Novo Nordisk (NVO) December 60/85 Bull Call Spread for $5 – Stock at 58.5
Buyer of 6,000 Pfizer (PFE) January 30 Calls for $0.68 – Stock at 27.5
Buyer of 11,000 Pfizer (PFE) November 27 Calls for $1.23 – Stock at 27.25.
The reason money may move into the pharma sector should the shutdown continue for weeks is that it’s considered a very defensive sector that often works well during worrisome times.
Speaking of pharma, this rush into the sector is one of the reasons we added PFE last week, as I think this trade could work several ways.
First is that the pharma sector is a defensive sector and if the market gets tired of the AI/growth gold rush, money could rotate into the long forgotten sector.
Second, the fourth quarter kicked off late last week and there is often a sector rotation when the calendar flips to a new quarter.
Finally, the pharma sector has been left for dead for years, and should traders race back into long forgotten stocks like PFE, BMY and more, there could be an epic chase to get back in.
And while I would note that option activity was bullish in a defensive sector like Pharmaceuticals last week, as noted below, option activity was very bullish in a variety of sectors last week.
Option Order Flow was fairly bullish this past week as my Options Barometer came in at:
Monday – 6
Tuesday – 6
Wednesday – 5
Thursday - 6
Friday – 6
Finally, the Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 16.60, which was mostly unchanged on the week. I would expect the VIX to remain at these “higher levels” until the Government shutdown is resolved.
Events for the Week to Come
I expect week two of the government shutdown may start to grab a bit more of traders’ attention this week, after a very muted reaction last week. That isn’t to say that the market will tank on this ongoing saga; instead, angst will start to rise as more and more time passes without a resolution.
And finally, it’s hard to believe it but earnings season starts again this week, though the list of companies reporting is small … the following week is when things start to really heat up on the earnings front.
Open Positions
Corning (GLW) March 67.5/100 Bull Call Spread – GLW continued its slow steady ascent last week as the stock closed at a new 52-week high on Friday. Our position is in outstanding shape at a potential profit of approximately 225%.
Coupang (CPNG) March 33 Calls – CPNG mostly chopped around last week, though it continues to look great. And of note, on Friday a trader executed a very bullish bull risk/reversal in the stock looking for a move higher.
Friday - Buyer of 3,000 Coupang (CPNG) September 37/45 Bull Call Spread and Sale of 3,000 September 23 Puts – Stock at 32.25 (bull risk/reversal).
CSX (CSX) January 32.5 Calls – CSX rallied very nicely last week perhaps on renewed takeover rumors as Citigroup came out with a note mentioning a three-way merger between CSX, Canadian Pacific Kansas City (CP) and Berkshire Hathaway’s (BRK.A, BRK.B) BNSF would be a savvy counter-maneuver to Union Pacific’s merger with Norfolk Southern.
Our calls are back at a potential profit of approximately 55%.
Deutsche Bank (DB) January 36 Calls – DB went sideways last week as European financials continue to mostly chop around. Not much more to add.
Freeport-McMoRan (FCX) November 43 Calls – FCX rallied nicely last week, regaining approximately half of the ground it lost the previous week. Aiding this rebound was wild call buying all week in the stock, and two upgrades, noted below:
UBS: Upgrades to buy, price target from 42.5 to 48
Bank of America: “We upgrade Freeport McMoRan (FCX) to Buy from Neutral. We maintain our price objective of $42 per share, which implies a 13% potential upside. We spoke with President and CEO, Kathleen Quirk. While we gained no material new information, we came away increasingly confident that our $42 per share valuation sufficiently prices the key risks around its temporarily halted Grasberg copper/gold mine in Indonesia.”
Grab Holdings (GRAB) January 5 Calls (exp. 2027) – GRAB mostly went nowhere last week, though interestingly, into a shallow dip on Wednesday and Thursday call buyers aggressively added to upside positions.
Pfizer (PFE) June 27 Calls – See “What Traders are Saying” above.
Robinhood (HOOD) December 50/95 Bull Call Spread – HOOD soared higher yet again last week, closing at a new all-time high. Our position is now at a potential profit of approximately 800%, though clearly, I made a mistake by capping our upside via the sale of the 95 call many months ago.
Russell 2000 ETF (IWM) January 222/270 Bull Call Spread - The IWM closed at a new all-time high on Friday as small-cap stocks have come alive in recent weeks. Our position is now at a potential profit of approximately of 83%.
Uber (UBER) December 90/125 Bull Call Spread – UBER continues to struggle with the 97-100 area despite the market ramping to new highs and the stock receiving an upgrade from Mizuho on Tuesday.
Though of note, on Thursday a trader bought 11,000 October 103 Calls for $0.75 – Stock at 96.5.
S&P 500 ETF (SPY) December 590 Puts – Last week I said that I was going to sell our SPY puts, but I never pulled the trigger on that sale as I was mildly worried about the government shutdown. Let’s see how the market fares early this week before making a move on this hedge.
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