By Steven M. Sears
A new front has opened in the war with Iran: the Battle of Tweets.
President Donald Trump posted on Monday that his representatives were negotiating to end the war. Iran posted back that it was a lie.
Since then, there has been a lot of back and forth. Some social-media posts seem credible, and others do not. Investors so badly want an end to the war -- which obviously harms financial interests -- that many of them are acting as if the hostilities will soon end.
The investment activity is odd because uncertainty defines the Battle of Tweets. And uncertainty, at least according to one of the few undisputed truths of investing, is the one thing that the market can't handle. Indeed, the major indexes surged on Monday and were wobbling on Tuesday.
So, a week after asserting in this column that investors should prepare for a longer war, we must now confront the specter of a shorter war too.
While we continue to see great merit in letting more information flow into the market before making decisions, we also recognize that many investors are addicted to perpetual motion.
They simply can't bear the thought of missing out on a big rally. While we find greater merit in focusing on how not to lose money, we also recognize that our duty includes offering some actionable ideas even when observing and thinking seems best.
For those investors who like to try to trade every beat in the market, we suggest an options strategy that pays off if stocks rise or fall. The so-called strangle strategy entails buying a put option and call option that are below and above the market, respectively, and that share the same expiration date.
If the underlying security falls below the put, the put increases in value. The same is true if the security rallies above the call. (Puts give investors the right to sell an asset at a set price and time, while calls give buyers the right to buy an asset.)
Consider the State Street SPDR S&P 500 exchange-traded fund (ticker: SPY) as an example of how the strategy works.
With the ETF at $653.26, an investor could buy the April $647 put that expires April 1 and the April $661 call that also expires April 1. The strangle costs about $13.15, but of course, the actual cost of the trade is multiplied by 100, which each options contract represents.
If the ETF is at $700 at expiration, the call is worth $39. If it is $600 at expiration, the put is worth $47. In the past 52 weeks, the ETF has ranged from $481.80 to $697.84. So far this year, it is down 4.2%.
The potential gains -- which could be substantial if the stock market moves sharply higher or lower -- might seem attractive. The chance of making money always seems plausible because few people focus on the hurdles that must be leapt for it to happen. Because the idea of making money feels good, it further masks an important difficulty in buying strangles: It is an expensive strategy that pays off only if the underlying security moves a lot more than the cost of the options.
To help overcome the not-insignificant expense of buying a strangle, we chose a short expiration that reduces the amount of time premium embedded in the options. The short expiration also provides maximum flexibility in managing the position should Trump continue to surprise investors.
At any moment, he could post something to social media that causes stocks to sharply surge or dramatically decline. The strangle excels in those situations.
Of course, it tends to be better to have a directional bias on which way stocks might move, but that is hard to have when the single strongest force in the global financial markets is a president with a keyboard who loves making social-media posts.
Email: editors@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 25, 2026 01:30 ET (05:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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