US shares rose on Friday after a 10-day Israel–Lebanon ceasefire began at 21:00 GMT on Thursday, and Iran said the Strait of Hormuz would be open to commercial traffic during the truce. The DJIA rose by more than 1,000 points to just below 49,800, the S&P 500 gained 1.5% to move past 7,100 for the first time, and the Nasdaq added 1.7%.
The Russell 2000 climbed 2.2%. DJIA futures rose overnight and tracked higher into the close, moving from about 48,700 early on to near 49,700 by late afternoon GMT.
Ceasefire Drives Equities Higher
Iran’s foreign minister said on X that commercial passage would be completely open for the truce period. President Donald Trump said Iran would never close the route again, while also saying the US Navy blockade of Iranian ports would continue until a peace agreement is reached.
Iran’s Tasnim agency said vessels linked to hostile nations would not be allowed through, and the strait would close again if the US blockade remains. WTI fell 14% to above $80 a barrel and Brent dropped 10% to above $89.
Boeing rose 3% and Royal Caribbean jumped 10%, with Amazon and Airbnb also higher. For the week, the DJIA was up 3%, the S&P 500 up 4%, and the Nasdaq up 6%, with attention turning to earnings and the upcoming PPI.
The massive risk-on rally has crushed implied volatility, with the VIX index likely falling below 14 for the first time in months. This makes hedging against a reversal extremely cheap. We should consider buying out-of-the-money puts on the SPY or calls on the VIX itself to protect against the ceasefire’s potential collapse.
The market has chosen to ignore the conflicting messages between Washington’s blockade and Tehran’s conditional reopening of the strait. This fragility is not priced in, creating a classic setup for a volatility spike if the deal falters over the next 10 days. A small position in VIX call options for May could provide a significant return if headlines turn negative.
Options Positioning For Oil And Travel
WTI crude’s 14% drop is one of the most severe one-day declines since the oil price collapse in 2020, suggesting the move may be overdone. While the path forward depends on politics, we can sell premium by using strategies like iron condors on oil ETFs. This approach bets that prices will now stabilize in a new range rather than immediately snapping back or continuing to plummet.
The rally in travel and leisure stocks was dramatic, driven by traders closing out their defensive short positions. We can still participate in this theme by using call options on airline and cruise ETFs to gain upside exposure with limited risk. Selling cash-secured puts on these names is also an option, as it allows us to collect premium while defining a lower price at which we’d be willing to own them.
With the geopolitical risk premium removed, market focus will pivot to the upcoming Producer Price Index report and Big Tech earnings. Options pricing for late April and early May expirations, which cover these key events, still shows elevated implied volatility. This indicates the market expects significant price swings based on fundamentals, even with the Middle East situation temporarily calmed.
