Artificial spending is finally being scrutinized by investors after years of overlooking technology companies increasing their CapEx budgets during the AI arms race. Both negative earnings reactions to Oracle and Broadcom this week have presented an opportunity to create income as AI looks to capture the next leg up. I want to use options on the iShares Semiconductor ETF (SOXX) to participate in the Santa Claus rally I see. In the wake of the Federal Reserve cutting its benchmark overnight rate by 25 basis points this week, U.S. equity markets established fresh all-time highs. The Dow Jones Industrial Average and S & P 500 set new record closing levels on Thursday. Historically, when the Federal Reserve has lowered interest rates while the S & P 500 was within 2% of an all-time high, the S & P 500 was higher one year later, 20 out of 20 times. Not bad, right? We all know that markets do not move in a straight line but, as many investors have been chasing this market higher since the April trade tariff lows, I believe another leg up is coming. To help fortify this decision is the fact that the Fed initiated QE lite and are starting to buy $40 billion a month of shorter-term bills and Treasury notes. On an annualized basis, this is the same notional size of QE1 that bailed us out of the Great Financial Recession. Lastly, the Volatility Index (VIX) traded down into the 14s on Thursday. This deterioration in volatility highlights the lack of concern investors have over the next 30 days, a green light to and end of year rally. Yes, Santa looks to be coming to town. The Trade: selling a put spread Sold the 1/16/25 $300 SOXX Put for $8 Bought the 1/16/25 $285 SOXX Put for $4 SOXX was trading just above $309 This spread will allow an investor to collect $4 or $400 per one put spread sold. DISCLOSURES: Kilburg is long SOXX and sold this spread. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
