Monday Morning Outlook
Stock Market Sentiment Continues to Favor Options Bulls
There is less optimism now among SPX equity options buyers than in May
Todd Salamone
Senior Vice President of Research
Jul 21, 2025 at 9:27 AM
schaeffersresearch.com
“Amid the tariff uncertainty, the best course of action is to key in on price action and separate threats from actions. In other words, it's a risk that Trump will follow through with threats, but judging by price action, the market is viewing these threats as simply that, for now.”
-Monday Morning Outlook, July 14, 2025
“Trump Eyes Tariff Rate of 10% or 15% for More than 150 Countries”
-Bloomberg, July 16.2025
“Donald Trump pushes for 15%-20% minimum tariffs on all EU goods”
-Financial Times, July 18. 2025
As the Trump administration’s self-imposed trade deadline of Aug. 1 approaches, tariff headlines swirl, but the S&P 500 Index (SPX—62,96.79) remains despondent overall.
Tariffs appear to be coming, but the 10-20% levy for more than 150 countries is less than the 35-50% tariffs many of them faced initially. This is perhaps something many investors accounted for when President Donald Trump backed off only a few days after swinging the bat.
As tariff updates continue to roll in, the message from last week remains the same: Key in on price action. The SPX achieved another all-time closing high last week, overtaking the 6,300-century mark intraday during Friday’s standard July expiration, only to finish below it at Friday’s closing bell.
Another uncertainty approaches at the end of the month, as the Federal Open Market Committee (FOMC) meets on monetary policy. Trump's criticism of Federal Reserve Chairman Jerome Powell is no secret, with Trump reportedly looking for an angle to relieve Powell of his duties.
Even amid those reports and disagreements on the future of interest rates, the SPX isn’t budging, despite what on the surface could drive pessimism, with the White House and Fed misaligned.
Per the discussion last week about Trump backing off when the market is in a tailspin and growing bolder when stocks are higher, short-term traders should be on the lookout for Trump to take bolder swipes as Aug. 1 approaches, especially with the SPX now 5% above its pre-Inauguration close in January.
The SPX enters post-July expiration week 153 points above the first major area of support, which is the prior all-time closing high in February at 6,144. Just below this level is the rising 30-day moving average at 6,135, which marked a low during a mild pullback in June. It is rising at about 10 points per day and is projected to be at 6,185 by Friday’s close. With the SPX’s average daily range of 50 points, this support seems light years away relative to mid-April and early May, when the benchmark's average true range approached 200 points.
If you are looking to hedge earnings, tariffs, and/or Fed uncertainty, and even the negative seasonality that lasts from mid-July into September, a move below this support level would be the time to consider initiating a hedge to long positions. This may cost you more if support breaks relative to now, with the Cboe Market Volatility Index (VIX—16.41) near two-month lows since the early April Liberation Day tariff spike. That being said, the VIX is still a couple points above its 2025 low, so there is room for it to move lower, which a bull might argue.
“…a chart that crossed my desk late last week was easy on the eye for bulls who have a contrarian mindset. Short interest data was released by the exchanges last week, and we found that total short interest on SPX components increased by 5% from the report two weeks earlier. The SPX managed gains amid the short interest build headwind, nonetheless.
-Monday Morning Outlook, July 14, 2025
Even with the SPX in all-time high territory, the sentiment backdrop continues to favor bulls. We mentioned high levels of short interest, which has been a bullish long-term factor since early last year.
From a short-term perspective, bulls should welcome the National Association of Active Investment Manager (NAAIM) weekly survey. The reading on July 2 was 99, suggesting active managers were fully invested. Last week, the reading was 83, indicating they have somewhat retreated. However, the SPX has not pulled back, as one might expect.
Put-buying relative to call-buying has also ticked higher since early July. While not at the extreme levels of bearishness that typically precede huge rallies, the ratio currently sits above its mid-May low, implying there is less optimism now among equity option buyers than May.
The fact that some are in retreat as stocks grind higher suggests there is still room to march higher, amid the many uncertainties that might be the root of the retreat.
Todd Salamone is Schaeffer's Senior V.P. of Research
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