From NVIDIA's financial report to the sudden negative impact of the trade war, a simple strategy may be the best choice this week

A classic saying on Wall Street is KISS, which stands for "Keep It Simple, Stupid," meaning keep it simple, don't complicate things. In the face of the myriad market factors today, this approach may be the best trading strategy to respond to various news this week.

The more catalytic events there are, the higher the likelihood of significant market fluctuations; if option prices are low, options can be a better tool for betting on market direction. Currently, buying SPY call options is a better way to go long on the market.

The reasons are as follows:

First, let's look at the U.S. Treasury market. The 30-year Treasury yield has reached a 20-year high. In response, Treasury Secretary Scott Bessenet is implementing a "Treasury version of twist operations," attempting to intervene in the long end of the yield curve: by issuing short-term debt to finance the repurchase of long-term bonds. However, this measure only maintained its effect for about a day. The 10-year Treasury yield, which he focused on, briefly fell to about 4.64%, then rebounded again, closing that week at 4.73%, the highest level since the global financial crisis. The continuously rising discount rate not only poses problems for government finances but also creates headwinds for all long-duration assets. Of course, there are pros and cons to everything. I believe that if the 10-year yield approaches 6%, the Federal Reserve may implement more substantial yield curve intervention measures, but there are also views that interest rates will not rise to that level. Taking the holdings of the 7-10 year Treasury ETF (IEF) as an example: Fisher Investments holds nearly 161 million shares, valued at about $15 billion. If you agree that a portion of long-duration assets should be allocated in fixed income, then you would also believe that the S&P 500 index is likely to set a new historical high before the end of this year.

Another major potential catalytic event: NVIDIA (NVDA) will release its earnings report on Wednesday. If NVIDIA's earnings report falls short of expectations, it will be difficult for the market to move in a positive direction. The index performance has been driven by capital expenditures in AI infrastructure, and NVIDIA is both the biggest beneficiary and an industry bellwether, as well as the largest component stock by weight in the index. As long as its earnings guidance slightly misses expectations, it will transmit to the semiconductor, hyperscale cloud vendors, power, and the entire AI industry chain. Even without such a chain reaction, NVIDIA's stock itself is enough to drive market fluctuations. In the past four earnings reports, NVIDIA's stock price has averaged a decline of about 6%; based on its current weight in the S&P 500 and Nasdaq indices, it would directly drag down both indices by nearly 0.5%. However, after a year of lackluster performance following earnings reports, this earnings report may reignite market bullish sentiment. Currently, NVIDIA's valuation multiples are far below the overall market.

In addition, risks related to trade and tariff policies still loom over the market. U.S.-Canada negotiations have once again broken down, and Canadian Prime Minister Mark Carney has confirmed that retaliatory tariffs will be implemented on September 8. A Bloomberg report states that Carney believes "it is almost impossible to restart negotiations with President Trump before the midterm elections." The market continues to fall into various prediction traps; of course, if the U.S. side presents an agreement that Canada cannot accept, the upcoming midterm elections will become a very obvious bargaining chip. It is worth noting that Trump's trade tariff policies have repeatedly caused losses for short-selling investors Once an unexpected agreement is reached, short sellers will be squeezed by the market again.

The market price trend itself is somewhat concerning. The storage sector was previously the hottest track in the market, with multiple stocks rising by hundreds of percentage points, but it has recently weakened sharply, even with impressive earnings reports still facing sell-offs. SanDisk (SNDK) has risen over 570% year-to-date, but has retraced nearly 32% since its June peak; Micron Technology (MU) has gained nearly 240% this year, but has fallen over 20% from its high; Seagate Technology (STX) and Western Digital (WDC) have also significantly retreated from their peaks, with Western Digital down nearly 40%. Last weekend, I spoke with a fund manager who mentioned, "The main upward wave of this round of the big market may have ended, but Micron's current forward P/E ratio is only slightly above 6 times. Is there a chance to recover to 12 times? Why not?"

Even with the aforementioned risks, the prices of SPY options remain very cheap. The implied volatility of at-the-money options for 30 days is about 12.6%, which is at the 13th percentile for the past year; looking at the year-to-date dimension, it is at the 6th percentile (admittedly, the sample period for this statistic is limited). When you can buy options at a reasonable price, you don't have to sacrifice your trading advantage to reduce risk.

Options Contract Situation: A call option that is 1.2% out of the money, with 7.5 weeks remaining until expiration; last Friday's closing price was $12.15, only 1.6% of the underlying closing price. This option covers Nvidia's earnings report this week, the retaliatory tariffs implemented in Canada on September 8, the Treasury bond repurchase operations starting on September 9, the Federal Reserve FOMC interest rate decision in September, and many other catalytic events that could stir the market.

If the market continues to rise, this option allows you to share in the market gains; if the market does not rise, your losses are also quite limited