US stock futures are slightly rising, with S&P futures up by 6.05 points. NASDAQ is expected to gain 8.75 points, and the Dow is up about 65 points. US companies have announced record share buybacks totaling $983.6 billion this year, and it may surpass $1.1 trillion. This trend is led by tech companies like Apple and Alphabet, along with banks like JPMorgan Chase and Morgan Stanley. Companies prefer buybacks over capital investment because of strong earnings, tax advantages, and extra cash amid uncertain trade policies. While buybacks can boost earnings and stock prices, there are worries about inflated valuations and a focus on short-term gains.

US Companies and Share Buybacks

AMD and Nvidia will pay a 15% fee on certain chip sales to China, as ordered by the US Government. As a result, AMD shares fell by 1.74%, while Nvidia’s dropped by 0.41%. President Trump is set to meet with Intel’s CEO, Lip-Bu Tan, today. Last week, Trump called for Tan’s resignation because of his ties to China and threatened the Intel Chip Act funds citing national security concerns. Intel shares have climbed by 2.56%. The wave of share buybacks, expected to reach $1.1 trillion, provides strong support for the broader market. Last year, buybacks were nearly $806 billion, making this year’s increase a significant cushion against major downturns. For traders in derivatives, selling out-of-the-money put options on indices like the S&P 500 (SPY) could be a good strategy to earn premiums. This large corporate buying power helps explain why the CBOE Volatility Index (VIX) has stayed relatively low, hovering in the mid-teens, even amid geopolitical tensions. This stable environment favors strategies that benefit from market stability. However, this calmness at the index level hides considerable turmoil within specific sectors.

Government Fees on Semiconductor Sales

The new 15% fee on certain AMD and Nvidia chip sales to China adds uncertainty to the semiconductor industry. This impacts profitability and indicates more aggressive government action, which often leads to sharp price swings. We should prepare for higher-than-normal volatility in the semiconductor sector for the coming weeks. Given the political risks affecting chip stocks, buying options that profit from significant price movements is worth considering. For instance, following the 2022 export controls, the semiconductor ETF (SOXX) saw its volatility soar over 40%, creating great opportunities for options traders. Thus, purchasing straddles or strangles on AMD and Nvidia appears to be a sensible move. The situation with Intel presents a classic binary event, where the stock could shift dramatically based on a single meeting’s outcome. The current implied volatility for Intel’s weekly options is high, reflecting this uncertainty. Traders can use short-dated options to make targeted bets on the outcome, as the stock is likely to respond more strongly than the broader market. Create your live VT Markets account and start trading now.

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