Between DeepSeek, tariffs, earnings, economic data, and the FOMC, we are certainly staying busy keeping up with fundamental inputs to the market. The flow of information has led to sector and stock rotation and hedging behavior in many portfolios. Amidst all of the noise, there are ways to find the potential benefactors that also have potential tailwinds from the new inputs.
As we approach this week’s employment report while simultaneously digesting the broad market information from individual corporate earnings and tariff implications, the market continues to churn:

The S&P 500 keeps testing highs before a new data point or piece of information takes a chunk out of the market. And after each dip, the market finds its footing to re-test highs. Eventually, a dip may turn into something more, but as we continue to see the pattern repeat, the market gets comfortable with repeating the strategy of buying dips.

And this sets up for a pretty exciting setup for the options trader. Consolidation and chop eventually leads to liquidation or a breakout. If buyers continue to be correct, the breakout probability increases. And if something comes out that’s more alarming for the global economy, the liquidation event becomes a higher probability. So, getting defined risk and leverage becomes more and more prudent.
While defining risk in the trade structure is crucial, it also works analogously to risk management for the world. With the announcement of DeepSeek, many investors turned to cybersecurity as a growing and important element of their portfolio allocation:

BUG is an ETF that focuses on cybersecurity stocks, and with recent news being less impactful to increasing the potential liquidation risk, it seems a smart potential play as the sector broadly tests all-time highs and prepares for a breakout.
Along with this tailwind, my AI-driven signals have highlighted an individual name that has explosive potential in CRWD:

Crowdstrike is testing highs, and at $400+ per share, may scare away some investors that simply feel they can’t get enough exposure in their portfolio to matter. But with options, I can structure a trade that represents 100 shares of stock by purchasing a call option for a fraction of the price. Or I could use a more complex structure like a call vertical that reduces my expense and further reduces my capital risk exposure as a result. The determination of how best to implement an AI-based signal with the right market tools is crucial for portfolio construction, and that’s what gets me excited about this kind of opportunity in CRWD.
If you want to learn more about utilizing AI for predicting dynamic markets and the incredible opportunities that can be captured utilizing state-of-the-art technological advancements in trade recognition, send me an e-mail and I’ll be sure to get you all the information you need!
As always, please go to http://optionhotline.com to review how I traditionally apply artificial intelligence, technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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