The NASDAQ Composite (IXIC) hit a record on Thursday and briefly moved above 26,000. It is up about 3.5% through Thursday this week and is on track for a sixth straight week of gains.
The index includes more than 2,500 stocks. Trading has been influenced by expectations of a possible Iran deal that could reopen the Strait of Hormuz, which has been largely closed for more than two months.
Tech Leadership And Market Breadth
Technology led on Thursday, rising over 0.9%, with communications up 0.7%. Since March 30, gains have mainly come from technology, consumer discretionary and communications.
WTI oil fell from $106 at the start of the week to around $93 on Thursday, with prices holding in the low $90s. The move followed renewed talk of peace discussions.
In earnings, Datadog (DDOG) rose over 30% after beating consensus and lifting its full-year revenue outlook by about 8%. Fortinet (FTNT) gained over 22% after raising guidance.
AAON (AAON) jumped as much as 50% on strong data centre bookings and reached a new high above its November 2024 record. The NASDAQ’s RSI moved into overbought territory, with levels near 24,000, 23,200 (26-week SMA) cited as support areas.
Risk Management With Options
Given the market’s six-week rally and overbought RSI we saw back in mid-2025, the most immediate response should involve managing risk. The market was clearly euphoric, driven by hopes of an Iran peace deal that was far from certain. This suggests using options to define potential losses while staying exposed to the powerful upward momentum.
A prudent strategy would have been to use bull call spreads on the Nasdaq 100 ETF (QQQ) rather than buying calls outright. This approach would have capped the upside but significantly lowered the cost of entry, a key consideration at the time. We can look back now and see that the CBOE Volatility Index (VIX) was trading around an elevated 25 during that period of geopolitical tension, making options premiums expensive.
Hedging against a breakdown in the peace talks was also critical, as the rally’s psychology was fragile. Buying protective puts or establishing put spreads on the QQQ would have provided a safety net. This would have insulated a portfolio from the sharp, sudden drop that would have occurred if the Strait of Hormuz situation had worsened.
The direct link between the rally and falling oil prices offered another angle for traders. A direct bet on the geopolitical outcome could have been made using options on an oil ETF. For example, buying puts on the United States Oil Fund (USO) was a direct play on the peace deal succeeding and oil prices continuing their slide from over $100.
Looking back from today, May 7, 2026, we know that while the uptrend in tech did continue, it wasn’t a straight line. That 24,000 level mentioned as a potential support was indeed tested during a sharp correction in the third quarter of 2025. Traders who had set up hedges or were prepared for that pullback were able to protect their gains from the spring rally.
