US stocks started the week on a positive note. The S&P 500 rose 0.5 percent, the Dow Jones Industrial Average increased by 0.3 percent, and the Nasdaq Composite gained 0.6 percent. Major tech companies like Apple and Meta helped drive these gains as they prepare to report their earnings. However, there were concerns about political risks. President Trump threatened tariffs on Canada, which ties into a potential trade deal with China. Worries about federal funding and immigration policy in Washington raised fears of a government shutdown.

Gold Hits New High

Gold reached a new high, surpassing $5,100 per ounce. This reflects cautious investor sentiment due to political and fiscal uncertainties. In the commodities market, gold miners such as Newmont reported significant increases. Shares of Novo Nordisk rose with the success of oral Wegovy in the obesity treatment market, while rival Eli Lilly lagged behind. Earnings season is entering a crucial phase, with over 90 S&P 500 companies set to report. About 75 percent of these companies have exceeded earnings forecasts, although revenue growth has slowed. Market players are looking forward to the Federal Reserve’s upcoming rate decision. No changes are expected, but there is focus on hints about future rate cuts. The Dow Jones Industrial Average, which consists of 30 major US stocks and is price-weighted, feels the impact of corporate earnings, quarterly results, and economic data. Dow Theory, created by Charles Dow, helps identify major stock market trends. It also includes trading methods like ETFs and options. As markets balance positive earnings with political anxieties, implied volatility has clearly risen. The CBOE Volatility Index (VIX) recently climbed above 17 from a low of around 13 earlier this month. This situation suggests that traders should consider strategies that benefit from price fluctuations, not just market direction.

Protecting Portfolios Amidst Rising Volatility

Gold’s rise to over $5,100 an ounce signals caution among investors, driven by concerns about tariffs and federal funding. To protect portfolios, buying put options on broad market ETFs like SPY or QQQ serves as a direct hedge against a possible downturn in the coming weeks. A similar flight to safety occurred during the budget negotiations in the fall of 2025, which rewarded those who hedged. Earnings season provides opportunities for volatility trades, especially with major tech companies reporting. While about 75% of companies have exceeded earnings estimates, this is below the five-year average of 77%, indicating that large surprises are becoming less common. Therefore, using straddles on stocks like Apple or Meta could be beneficial, allowing traders to profit from significant price moves in either direction after their announcements. Everyone will be watching for the upcoming Federal Reserve announcement for signs regarding rate cuts. According to the CME FedWatch Tool, futures markets currently suggest a roughly 60% chance of a quarter-point cut by the September 2026 meeting. If the Fed’s message seems more cautious than expected, it could lead to a sell-off, making short-term puts a smart tactical move. Specific sector trends are also revealing clear opportunities for derivative trades. The strength in gold makes call options on miners like Newmont appealing to take advantage of the current momentum. In healthcare, the performance gap between Novo Nordisk and Eli Lilly offers a chance for a pairs trade using options—buying calls on Novo while purchasing puts on Lilly to benefit from their differing results. Create your live VT Markets account and start trading now.

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