As of late August 2025, U.S. markets are at a crossroads. We are seeing the signs for small-cap breakouts , while Nvidia’s earnings once again highlight how one company can sway entire indices. At the same time, record corporate buybacks are helping support prices, even as concerns build about the sustainability of the AI-driven rally.
At Dorian Trader, we keep a close eye on these shifts because they directly affect how we build and adjust our option strategies. Let’s break down the biggest themes traders should be watching now.
The Russell 2000 has surged over 6% in August and is now pressing up against its November 2021 peak after nearly three years of stagnation. A confirmed breakout would mark a major sentiment shift, signaling broader participation beyond the mega-cap names.
Consider setups like bull put spreads on RUT, or analogous plays on SPX/NDX, to capture upside momentum while keeping risk defined.
Nvidia posted another 56% year-over-year revenue gain in Q2, extending its dominance in AI-related hardware. Yet the market’s response was mixed, as investors weighed supply chain pressures and questions about future demand.
With Nvidia now carrying an ~8% weight in the S&P 500, its earnings often ripple across the entire index. Options pricing suggested S&P 500 movement of up to 0.9% post-report, showing how closely tied the broader market is to a single stock.
If you expect volatility expansion, straddles or strangles on NVDA can be effective. If you prefer indirect exposure, use hedged SPX option structures to ride index movement tied to Nvidia.
Companies have already authorized more than $1 trillion in buybacks this year, with forecasts pushing toward $1.3 trillion by year-end. Heavyweights like Apple, Alphabet, and JPMorgan continue to provide a steady bid under the market through aggressive repurchases..
Buybacks often create a tailwind for equities. For directional plays, look to SPY or QQQ call spreads, or lean into defined-risk bullish structures while liquidity remains strong.
While AI has fueled much of 2025’s equity gains, skepticism is growing. Reports suggest that up to 95% of AI pilot projects are failing to deliver ROI, and even industry leaders have warned against over-inflated expectations.
At the same time, Fed Chair Powell noted at Jackson Hole that while easing is on the table if labor markets soften, the Fed remains cautious about inflation. Both factors could introduce volatility into September trading.
Balance exposure by mixing tech-focused trades with defensive index spreads. Consider rotating into sectors less dependent on AI hype.
QUICK TIP: When a single stock like Nvidia carries massive index weight (~8% of the S&P 500), its earnings can move the entire market. If you want exposure without trading NVDA directly, consider hedged SPX option structures they let you capture index volatility while keeping risk defined.
Small-Cap Breakout
→ Consider bull put spreads on RUT or SPX to capture upside momentum with defined risk.
Nvidia Post-Earnings
→ Use straddles or strangles on NVDA for volatility plays, or hedge with SPX option structures.
Record Buybacks
→ Look at SPY/QQQ call spreads or other defined-risk bullish setups supported by corporate demand.
AI Caution
→ Rotate into value sectors or use defensive spreads to balance exposure as optimism cools.
Late August 2025 offers opportunity and risk in equal measure. Small-caps may finally join the rally, Nvidia continues to act as a market bellwether, and corporate buybacks provide a cushion beneath prices. But with AI optimism facing pushback and the Fed still weighing its next move, volatility is never far away.
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