Investor sentiment has drastically changed in recent weeks as tariffs — or the threat of tariffs — have been introduced to the markets. Last month’s discussion of awakening animal spirits and multiple analysts racing to readjust their 2025 S & P 500 targets served as a warning, as the Cboe Volatility Index (VIX) crashed under 15. The Invesco QQQ Trust , which tracks the Nasdaq-100, and the S & P 500 have been dropping precipitously — even dipping under their 200 day moving averages for the first time in roughly 400 trading days. I believe now is the time to add U.S. equity exposure. I want to use options to potentially establish a long position and capture a snap back in the SPDR S & P 500 ETF Trust (SPY) in this newly elevated volatility landscape. Per friends at Bespoke Investment Group: The average U.S. stock is now 30% below its 52-week high, which on average was made on Sept. 21. I do not believe market fundamentals have changed despite the uncertainty of tariffs dominating the daily headlines. One interesting component of the market that should serve as a shock absorber once tariffs are hashed out is the move lower in interest rates. The 10-year note dropped from its recent high of 4.8% down to 4.12% earlier this week. This coupled with a weakening dollar should fuel equities higher once investors digest the ultimate status of tariffs. The last bit of optimism is crude oil prices have tucked down into the 60’s, this should help lower inflation. An old adage I learned in my years of pit trading in Chicago is to “be greedy when others are fearful” and conversely “be fearful when others are greedy.” I believe the recent injection of market uncertainty, which has produced some significant investor fear, presents opportunity. An investor has to be on board with owning the market in this options trade, as there is risk of being put to a long position in SPY. However, by using a risk reversal an investor has the ability to finance the upside call which will become profitable in the event the March Madness subsides, and equities resume their trajectory inside of this bull market. The trade Sold the 3/28/2025 $560 put for $8.00 Bought the 3/28/2025 $580 call for $7.80 This risk reversal will allow an investor to collect $0.20 or $20 per one spread This was filled when SPY was roughly trading $571.50 An investor will sell a cash-covered put at $560 and will own SPY at $559.80 in the event SPY is below that price upon expiration. An investor potentially is long SPY above $579.80 looking to capture unlimited upside profitability. DISCLOSURES: Kilburg owns the spread and is short $570 SPY puts as well. He is also long SPY. 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.
