Although the tech sector felt like it was in a freefall in April, it apparently was simply on a bungee cord as we have now seen the Nasdaq 100 ETF (QQQ) snap back more than 20% since the volatile April 7 lows. I want to use options to have the ability to capture even more upside as bullish momentum is driving the bears back into their caves. The S & P 500 is trying to string together a nine-day streak of gains, historic in itself. Front month Nasdaq Futures (June contract) reclaimed 20,000 this morning after nearly dipping under 16,000 less than a month ago. The contrarian in me wants to sell this rip, but the historic volatility in April has created a bifurcation (not just in sentiment) in investment behavior, which should exaggerate moves to the downside and upside alike. That being said, defining risk has never been more important for investors. The Nasdaq 100 is still roughly 10% off all time highs and the under-invested or current shorts in equities could create a melt-up scenario in the month of May. Technicals also are important to consider as a 200-day moving average test seems imminent. When markets become uncertain and emotional in the way they have since the trade tariffs have been clumsily introduced to markets, technicals carry more weight. Do I care about earnings? Of course, and we have had a better-than-expected earnings season thus far with over half of the S & P 500 and most of the Mag 7 already delivering reports. Approximately 73-76% of these companies beat earnings per share (EPS) estimates, with 64% surpassing revenue expectations. The blended EPS growth rate for the S & P 500 is reported at 10.1% to 11.7% year-over-year (YoY), significantly higher than the 6.6% consensus estimate at the quarter’s start. Revenue growth is tracking at 4.6-4.7% YoY, slightly above the 4.3-4.4% expected. This marks the seventh consecutive quarter of YoY earnings growth for the index, per FactSet. In summary, Q1 2025 earnings have exceeded diminished expectations for many S & P 500 companies, particularly in tech. The Trade (Call Spread) Bought the 5/30/2025 QQQ $490 Call for $11.50 Sold the 5/30/2025 QQQ $505 Call for $5.00 This Call spread will cost $6.50 or $650 per one spread QQQ was roughly trading $486 when this trade was executed An investor is risking $650 to make $1500, resulting in a net profit of $850 if the spread fully fills out. DISCLOSURES: (Long this call spread, long XLK calls too) 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.
