After years of overlooking tech companies increasing their capital spending budgets amid the AI arms race, human spending is finally coming under scrutiny by investors. This week’s negative earnings reactions to Oracle and Broadcom have created an opportunity to generate revenue as AI looks to capture the next step. I would like to participate in the Santa Claus Rally using the iShares Semiconductor ETF (SOXX) options. This week, the U.S. stock market hit a new all-time high after the Federal Reserve cut its benchmark overnight interest rate by 25 basis points. The Dow Jones Industrial Average and S&P 500 set new records at Thursday’s closing. Historically, if the Fed lowers interest rates when the S&P 500 is within 2% of its all-time high, 20 out of 20 times the S&P 500 will be higher a year later. Not bad, right? We all know markets don’t move in a straight line, but I believe more upside is coming as many investors have been chasing this market rally since the trade tariff reduction in April. Reinforcing this decision is the fact that the Fed has begun simple QE and purchases of $40 billion in short-term bills and Treasury bills each month. Annualized, this is the same notional size of QE1 that saved us from the Great Recession. Finally, the Volatility Index (VIX) fell to the 14 level on Thursday. This worsening volatility highlights that investors are not concerned about the next 30 days, or the green light for a year-end rally. Yes, it looks like Santa is coming to town. Trades: Selling a Put Spread 1/16/25 Sold a $300 SOXX Put for $8 1/16/25 Bought a $285 SOXX Put for $4 SOXX was trading just above $309 This spread allows investors to collect $4 or $400 per put spread sold. Disclosure: Kilberg is long SOXX and sold this spread. All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
