The April 2 tariff deadline could be a disruptive, but not catastrophic, event for stocks, according to the options market. The S & P 500 may end next week up or down 2.5%, according to options expiring Friday, April 4, according to Michael Khouw, chief strategist at OpenInterest.Pro. A typical move for the broad market index is a move of less than 2% to end the week — possibly 1.9%, or less. But while a move of 2.5% or more in either direction would be above average, it certainly wouldn’t count as wild compared with history, Khouw said. That suggests traders expect the final decision on reciprocal tariffs will be far less stringent than the Trump administration initially indicated. “The way I read the options market, most people’s expectation is it’s going to be disruptive — mildly so — but probably over the course of time, there will be some kind of a normalization where we reach a compromise, and it’s not going to be that severe,” said Khouw. “That’s what’s currently priced in.” Other Wall Street strategists are concerned that investors underestimate the potential for April 2 to serve as a market negative. Wolfe Research’s Tobin Marcus expects the final level of reciprocal tariffs will be high next week, and “likely more severe than markets expect.” This week, Goldman Sachs’ Jan Hatzius said the event might act as a starting point for negotiations and “incentivizes the administration to propose higher rates at the outset.” Still, the recent concerns around April 2 may have eased somewhat as President Donald Trump walked back some of his tough stance on trade. On Tuesday, he told Newsmax that tariffs will likely be “more lenient than reciprocal.” Another signal of potential softening came later from a White House official, who told CNBC’s Eamon Javers that the Trump administration will no longer take into account nontariff barriers raised against the United States by other countries to determine the reciprocal tariff rate. “It looks more like a disruption than it looks like a catastrophe,” Khouw said. On the other hand, Trump late Wednesday said he would place 25% tariffs on “all cars that are not made in the United States.” So, if nothing else, trade conditions remain fluid. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange!| Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
Options market is pricing in a disruptive, but not catastrophic, response to April 2
