A trading strategy for this market after Trump causes volatility to spike again

President Trump threatened to raise tariffs on the EU up to 50% and impose a 25% tariff on Apple if iPhone manufacturing doesn't move to the US, triggering an immediate sell-off in equity markets, with European markets declining by 2%. Despite the market dip, one investor is implementing a bullish strategy by selling a put spread on the SPY, citing technical analysis and the S&P 500's 17.5% rebound since April, anticipating support around the 200-day moving average of $575.

Analysis

President Trump's renewed tariff threats, including a potential 50% tariff on the EU and a 25% tariff on Apple if iPhone manufacturing is not moved domestically, triggered an immediate sell-off in equity markets, with European markets declining by 2%. This development introduces significant uncertainty, particularly for companies like Apple, which faces direct financial implications from such targeted tariffs. Despite this bearish catalyst, the article details a contrarian bullish options strategy on the S&P 500 ETF (SPY). The author posits that the S&P 500, which has rebounded approximately 17.5% since its April 7th lows, is poised to retest all-time highs in June. To capitalize on the market dip, a put spread was executed on SPY (selling the June 20, 2025 $575 put and buying the June 20, 2025 $560 put, collecting $4.25 per spread) when SPY was trading near $576. This strategy is predicated on technical support at SPY's 200-day moving average of $575. The Cboe Volatility Index (VIX) rose to 22 on the tariff news, indicating increased market fear and higher option premiums, which benefits option sellers. The overall situation reflects a mixed sentiment: negative geopolitical news driving market volatility, juxtaposed with a specific investor's speculative, bullish stance on the U.S. market, supported by technical analysis.

Key Decisions for Investors

• Investors should closely monitor ongoing trade tariff negotiations as they represent a significant source of market volatility and can directly impact specific sectors and companies like Apple.
• For those considering a bullish position on the S&P 500, the described put spread strategy on SPY offers a defined-risk approach to potentially benefit from market dips, particularly if key technical levels like the $575 support hold, though the elevated VIX warrants caution.
• Holders of Apple (AAPL) stock should be particularly attentive to developments regarding the threatened 25% tariff, as its implementation could materially affect the company's cost structure and profitability, justifying a review of exposure or hedging strategies.