Options Weekly Roundup - Risk-Off Sentiment Is Rising: What Should U.S. Stocks Watch This Week?

Hello Mooers,

For the week ended March 6, U.S. equities turned defensive. The Dow fell 3.0%, its worst weekly drop since early April, the S&P 500 lost 2.0%, its biggest weekly decline since mid-October, and the Nasdaq shed 1.2%. Friday’s selloff was driven by two forces: a sharp jump in oil prices as the Middle East conflict intensified, and a much weaker-than-expected February jobs report, with nonfarm payrolls falling by 92,000 versus expectations for a 59,000 increase and the unemployment rate rising to 4.4%.

Sector performance reflected a classic inflation-shock rotation: energy outperformed as WTI settled at $90.90 and Brent at $92.69 on Friday, while consumer staples also held up. By contrast, financials weighed on the Dow, and cyclicals such as industrials, materials, healthcare, and airlines came under pressure as investors worried that higher fuel costs could squeeze margins and slow growth. Tech was mixed—broader AI skepticism kept sentiment fragile, but Broadcom and select chip names provided partial support.

Looking ahead, this week’s market focus will be on two variables: whether the Middle East shock broadens further, and whether Wednesday’s CPI confirms or challenges the inflation narrative. A tame CPI could offer only limited relief because it largely predates the latest oil surge, while any upside surprise—especially if Brent pushes toward or above $100—could further delay Fed cut expectations and keep pressure on richly valued growth stocks.

What’s Trending

As this earnings season draws to a close, Broadcom, one of the major chip names, reported its Q4 results this week. The stock jumped 4.8% after earnings. However, based on its latest share price so far, it is still down 20% from its December high of $413. Broadcom’s latest results, to some extent, have helped restore market confidence in the AI narrative. In his article, @LukeHW proposed an options strategy ahead of Broadcom’s earnings.

Judging from the post-earnings price action so far, that strategy appears to have been on target.

Based on the current IV of the nearest options contracts, the expected move for the earnings is 8.22%. If the market is still in "risk-off" mode, any earnings beats will likely be downplayed and the space for price to move up is limited. Therefore, if the forecast is for neutral, or range-bound, price action, selling a strangle with near-neutral delta, while capturing the premium. Read more>>

Opinions

Regarding this geopolitical crisis, although the surprise joint strikes by the U.S. and Israel last weekend severely damaged Iran’s military strength and its religious leadership, Iran’s resistance does not appear to have collapsed immediately and may even be intensifying. By the weekend just passed, regional tensions suddenly escalated, international oil prices surged above 110, and the crisis broke out in full force.

In an article published on March 5, @nerdbull1669 noted that the VIX had already risen above 25 and stayed elevated for some time. In the article, the author argued that this spike in the VIX reflects investors’ demand for geopolitical hedging, rather than signaling the start of a prolonged bear market. The author wrote:

The primary driver is the escalating conflict in the Middle East, specifically involving U.S.-Israeli strikes on Iran. This has created a specific "Volatility Shock" characterized by:

Oil & Energy Sensitivity: WTI Crude has surged above $75–$77/bbl. This raises "cost-push" inflation fears, which complicates the Federal Reserve’s path for rate cuts later this year.

Sector Rotation, Not Total Flight: While tech and software stocks have been hit hard due to high valuations and AI-monetization skepticism, the Energy (XLE) and Defense sectors have reached new highs.

The "Broadening" Narrative: Interestingly, the S&P 500 Equal-Weight Index has been significantly outperforming the standard market-cap-weighted index. This suggests the "Magnificent Seven" are losing their ability to carry the index, but the rest of the market (the "other 493") is showing underlying resilience. Read more>>

Riding the Wave

Although the market has been volatile, it has still provided ample trading opportunities. For example, @AlexHeng has initiated some short put positions earlier when the market was at lower levels are now approaching expiration, while the stock prices remain well above the strike prices. In such cases, these short puts can simply be left to expire worthless naturally. Read more>>

Looking Forwards

Earnings to watch:

Oracle — Tuesday, after-hour

AVAV — Tuesday, after-hour

FUTU — Thursday, pre-market

Adobe — Thursday, after-hour

With multiple macro, geopolitical, and earnings factors in play, market volatility may pick up this week—creating more opportunities for options trading!

If you find this article useful, don’t hesitate to tap ❤️, drop a 💬, and spread the wisdom! 🌟

Stay tuned for more, and happy trading! 🌟

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