The NASDAQ 100 rose 3.5% at Wednesday’s open, its largest single-session percentage gain since 12 May 2025. The move followed US President Donald Trump agreeing to a two-week ceasefire with Iran late Tuesday.
Israel said it would continue fighting in Lebanon against Hezbollah, and hostilities continued overnight between Hezbollah, Israel and Iran. The ceasefire agreement calls for Iran to reopen the Strait of Hormuz to Gulf nations’ oil.
Nasdaq Rally Cools After Early Surge
After the initial jump, the NASDAQ 100 eased to a 2.4% gain as traders took profits. US WTI crude fell 15% on the ceasefire news, while US oil prices were still above $90 a barrel.
The index had dropped nearly 13% one month into the war and is now a little more than 5% below all-time highs. It faces resistance near 25,180 (early March highs) and 25,330 (February resistance).
The NASDAQ 100 is trading above its 50-day Simple Moving Average for the first time since early February. Further support is near the 200-day Simple Moving Average around 24,500, with an all-time high at 26,182 from late October 2025.
Given the sharp rally and break above the 50-day moving average, we see an opportunity to position for further upside using call options. Traders could consider buying calls with strike prices targeting the March resistance near 25,180 and ultimately the late October 2025 all-time high. Using longer-dated expirations, such as those in May or June, would provide time for the gradual rise to play out.
Hedging Risk Amid Fragile Ceasefire
However, the ongoing conflict between Israel and Hezbollah makes the ceasefire with Iran fragile, creating significant downside risk. To hedge against a sudden reversal, purchasing put options with strikes near the 200-day moving average around 24,500 offers protection. This level should act as a firm floor if geopolitical tensions flare up again and the short-term peace deal collapses.
The market is pricing in this uncertainty, even after yesterday’s move. The CBOE NDX Volatility Index (VXN) fell over 20% but remains elevated at 28, well above the 2025 average of 19. This suggests that option sellers are still demanding high premiums, reflecting the binary risk of either a sustained peace rally or a sharp conflict-driven sell-off.
We must also watch oil prices, as they are a key driver of inflation and economic stability. While WTI crude’s 15% drop is a positive sign, the price settling near $92 a barrel is still historically high. The latest EIA report shows U.S. crude inventories are still 8% below their five-year average, meaning any disruption to the Strait of Hormuz could send prices soaring again.
This situation feels similar to the relief rallies we saw in early 2022 following the initial shock of the Ukraine invasion, which were often met with reversals on negative headlines. Open interest data shows a recent surge in out-of-the-money NASDAQ 100 calls, indicating that bullish speculation is building quickly. This crowded positioning could lead to a sharp pullback if the positive narrative around the ceasefire begins to weaken.
