Tech stocks surge as traders bet on bull put spreads amid US-Iran détente
The stock market saw a strong rise on Tuesday, driven by easing tensions between the US and Iran. Major tech stocks like Alphabet (GOOGL) and Apple (AAPL) climbed, with GOOGL closing near its daily high. Meanwhile, traders used bull put spreads to capitalise on the upward momentum in these shares. Apple's stock rebounded on Tuesday after testing its 200-day moving average. The recovery prompted some traders to set up a bull put spread by selling the April 17 put at a $245 strike and buying the $240 put. This strategy limits risk, as the purchased put caps potential losses. The maximum risk for this trade is $425, with a possible return of 17.65% if AAPL stays above $245 by expiration.
Alphabet also gained sharply, leading traders to create a similar spread. They sold the April 17 put at a $270 strike while buying the $270 put. The maximum risk here is $423, offering an 18.20% return on risk if GOOGL remains above $270. A bull put spread is generally seen as safer than selling a naked put because the long put acts as a hedge.
Elsewhere, Robinhood Markets (HOOD) struggled recently, but unusual options activity on Tuesday hinted at a potential turnaround. The increased trading volume suggested some investors believe the stock may have reached a low point. The market's Tuesday rally gave traders opportunities to use bull put spreads on strong-performing stocks. For both AAPL and GOOGL, the strategy offers defined risk and potential returns if the shares hold above key levels. The moves reflect confidence in tech stocks amid improving geopolitical conditions.
