Technology Stocks Gains

Technology stocks are on the rise. Nvidia gained 4.16%, Broadcom climbed 9.43%, and AMD rose 3.58%. Other significant increases included Arm at 7.40%, GameStop Corp at 5.26%, Taiwan Semiconductor at 4.76%, and Super Micro Computer at 4.56%. US Treasury yields fell ahead of a 10-year note auction. The 2-year yield dropped to 3.527%, the 5-year yield to 3.581%, the 10-year yield to 4.047%, and the 30-year yield to 4.698%. In commodities, crude oil increased by $1.23 to $63.86, gold rose by $23.90 to $3,647.56, and Bitcoin jumped by $2,388, reaching $113,919. The strong rally in tech stocks, especially in semiconductors like Nvidia and Broadcom, suggests that we should stay positive on the NASDAQ 100. Buying call options on tech-focused ETFs can capture this growth. With Oracle’s strong outlook, this sector’s strength is likely to continue in the coming weeks. However, the contrast between the rising NASDAQ and the falling Dow Jones Industrial Average shows a narrowing market. This pattern, where tech outperforms industrials, has been common since the AI boom of 2023-2024 and often signals broader market volatility. We should consider buying put options on industrial or small-cap ETFs to protect against weakness outside the tech sector.

Opportunities For Volatility Trades

This market split is creating chances for volatility trades, as the VIX has been increasing and recently reached 19. A pairs trade, buying NASDAQ futures and selling Dow futures, could capitalize on this divergence. This strategy benefits from technology outperforming older economy stocks. The decrease in US Treasury yields, despite rising crude oil prices, signals growing worries about economic growth. Recent comments from the Fed suggest a pause, and last week’s August CPI report showed core inflation stubbornly high at 3.8%. Options on long-duration Treasury ETFs can be used to bet on further yield declines if the market anticipates an economic slowdown. The rise in gold to over $3,600 an ounce, along with a climbing Bitcoin price, indicates traders are looking for inflation hedges and alternative assets. This demand is likely to continue as long as inflation remains a concern. We can use call options on gold and oil ETFs to capitalize on this trend in commodities. In Europe, the mixed performance—with Germany’s DAX falling while Spain’s Ibex rises—suggests a confusing outlook. It’s wise to avoid broad European index bets. Instead, we could use derivatives to focus on individual country trends, like shorting the export-heavy DAX while staying neutral on southern European markets. Create your live VT Markets account and start trading now.

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