The month of May added to the remarkable V-shaped comeback equity rally in the wake of “liberation day.” As I expect June to be another positive month in U.S. equities, I want to remain bullish as the bears seem to weaken on a daily basis. After a nearly 25% bounce off the April lows, I see more upside and an all-time high retest coming. I am defining my risk by using options on the Nasdaq-100 ETF (QQQ) to participate in this bullish move. May caught many bearish traders by surprise. Analysts continue to have to reconfigure their 2025 end-of-year price targets. The S & P 500 and Dow Jones Industrial Average popped 6% and 3.8%, respectively, in May. The higher beta Nasdaq-100 (QQQ) surged 9% this month, on track for its best month since November 2023. The continuous neck-snapping moves for investors trying to monitor tariffs on a 24/7 basis, feels more like watching Forrest Gump in one of his fast-paced ping-pong matches. President Donald Trump said this morning China violated its preliminary trade deal splashing out one of his social media posts after Treasury Secretary Scott Bessent said U.S.-China trade talks “are a bit stalled.” U.S. equites turned lower after Trump’s post to start trading for the last day of the month. I remain optimistic that we will find a deal with China but, as expected, it will not be a straight-line path for negotiations between our economies. Additional fuel into the bullish thesis: Inflation rate slipped to 2.1% in April, lower and cooler than expected, per the latest reading of the Fed’s preferred inflation gauge (PCE). Markets have been grappling to determine if tariff policy has been inflationary or even possibly deflationary (demand dampened). Earnings season resiliency, cooler-than-expected inflationary data, coupled with my optimism on overall trade tariffs being resolved this Summer, markets seem poised to push higher and test the nerve of the under-invested. I am using the 200-day moving average down around $497 to help me establish what level I am selling puts at to finance the upside calls I am buying. $540 is the level I would like to see QQQs retest. The trade: Selling a risk reversal Sold the QQQ June 27 $500 puts for $6.25 Bought the QQQ June 27 $525 calls for $8.00 This debit spread costs $1.75 or $175 per one lot spread This trade was executed when QQQs was roughly trading $516 DISCLOSURES: Kilburg owns the spread above and is long QQQ. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
