How to play the pullback in tech software names this week using options

08-08-2025

Better-than-expected earnings growth in Q2 has kept the equity bulls in control. Underneath the surface investors are enjoying the outperformance in technology software names as markets now sit in an interesting vacuum until the Fed's critical September meeting. Even though this rally is getting long in the tooth, I believe there is more room to run. I want to use the iShares Expanded Tech-Software Sector ETF (IGV) to define risk as this basket of tech software stocks has had a tremendous run since Liberation Day lows in April while seeking to further capitalize on a move higher in this basket of software names such as Palantir , Oracle , and AppLovin . CPI data next week will further assist investors in better understanding what the Fed might do at their meeting in September, but the CME Group's Fed Watch tool is currently suggesting a 91% chance of the Fed cutting interest rates. This would be the first 2025 rate cut. Software stocks have endured some broad selling pressure recently, but Fortinet was an extreme example as the cybersecurity leader dropped by over 20% Thursday. Shares plunged after the cybersecurity firm implied a product refresh cycle may be less impactful than the bulls wanted. That being said, I still believe the momentum in tech has the ability to push associated names higher. Instead of picking one individual name, I am choosing to use IGV which owns roughly one hundred different tech companies. I want to define my risk by owning a call spread in the event momentum fades in tech software names and the impressive 2025 rally comes to a screeching halt. The trade Bought the $110 Sept. 19 IGV Call for $3.75 Sold the $120 Sept. 19 IGV Call for $0.50 This trade was executed when IGV was trading just above $110 This spread will cost an investor $3.25 or $325 per one lot The spread will have the ability to profit when IGV is trading above $113.25 DISCLOSURES: (Long IGV, long this call spread) 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.

Hashtags

Business

Finance

#IGV

#iSharesExpandedTech-SoftwareSectorETF

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Mizuho Sees Potential for This AI Stock to Join the Trillion-Dollar Club

Business Insider

an hour ago

Business Insider

Mizuho Sees Potential for This AI Stock to Join the Trillion-Dollar Club

Oracle (ORCL) is making strong progress in enterprise AI, and Mizuho Securities believes it is only the beginning. The firm raised the stock's price target to $300 (20.8% upside) from $245 and kept a Buy rating, citing rising demand for AI and ORCL's solid position in the market. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. 'At the cusp of the enterprise AI revolution, we have increased confidence that Oracle is emerging as a structural AI winner,' Mizuho said. Key Growth Drivers The firm highlighted Oracle Cloud Infrastructure (OCI) as a key growth engine, thanks to its fast and cost-effective GPU clusters. This is evident in ORCL's future contract commitments (RPO), which increased 41% year-over-year to $138 billion. OpenAI alone is expected to bring in $30 billion by FY28. Also, Mizuho noted that Oracle is rapidly growing its GPU power, doubling from 65,000 units in FY24 to over 130,000 in FY25. It even noted a huge expansion in FY27, including a possible 2-million-chip order for OpenAI. With this growth, Mizuho projects a 28% annual revenue growth rate through FY29, reaching $152 billion. Finally, with Oracle AI World and Analyst Day slated for October, the firm sees room for further upside. 'ORCL remains one of our top picks,' Mizuho added. ORCL's Valuation Still Attractive The firm raised its FY28 revenue forecast for Oracle to $124 billion from $95 billion, and operating income to $47 billion from $40 billion. It cited both near-term catalysts and long-term structural drivers for this upside. Even after a 48% gain this year, Mizuho says Oracle is still cheaper than its infrastructure peers. It is trading at 15x estimated FY28 EBIT compared to 23x for others. Also, the new $300 price target reflects an 18x multiple, reflecting confidence in Oracle's ability to capture a large share of enterprise AI spending. Is Oracle a Buy, Sell, or Hold? Overall, ORCL stock has a Moderate Buy consensus rating based on 24 Buys and 10 Holds assigned in the last three months. The average Oracle stock price target of $248.79 implies about 0.18% upside from current levels.

Key for Fed Is Retaining Inflation-Fighting Credibility: Misra

Yahoo

2 hours ago

Yahoo

Key for Fed Is Retaining Inflation-Fighting Credibility: Misra

JPMorgan Asset Management Core Plus Bond ETF Portfolio Manager Priya Misra believes if the Fed starts the process of cutting rates based on data, inflation forecasts and where the expectations are leading, they will retain their inflation-fighting credibility. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

PPI Data Complicates Picture for Rate Cut

Wall Street Journal

2 hours ago

Wall Street Journal

PPI Data Complicates Picture for Rate Cut

The producer-price index is volatile and often overshadowed by consumer price trends, but analysts were paying attention Thursday after a hot number. An earlier inflation report this week showed that consumer prices on an array of goods, excluding food and energy, rose a little faster than economists had expected. Together, the two reports offer a clearer picture of the path of inflation and contribute to a key gauge of prices that the Fed uses to make decisions about interest rates.