Geopolitical Fire, AI Euphoria: 3 LEAPS Setups to Watch Now

When the U.S. and Iran exchange military strikes over a weekend and S&P 500 futures open higher on Monday morning, something significant has shifted in market psychology. This isn't blind optimism. This is a market that has found a stronger gravitational pull than geopolitical fear — and that pull has a name: artificial intelligence earnings. For options traders, particularly those hunting deep out-of-the-money LEAPS priced between $0.01 and $0.08, this kind of divergence between macro headlines and price action is exactly the environment that can produce asymmetric returns. The risk premium that should be baked into options right now is being overwhelmed by earnings-driven momentum. That gap is where opportunity lives.

What's Actually Happening

Let's be precise about what the market is telling us. S&P 500 futures gaining 0.3% after a weekend of U.S.-Iran military exchanges isn't just "resilience" — it's a structural statement about where institutional capital is anchored right now. The bid under tech isn't retail FOMO. It's systematic funds, pension rebalancing, and momentum algos all pointing at the same sector: AI semiconductor and infrastructure plays.

The earnings catalyst driving this is real and measurable. Companies like Nvidia (NVDA), Broadcom (AVGO), and Meta (META) have delivered revenue beats that weren't marginal — they were the kind of numbers that force analysts to rip up their models and rebuild. When Wall Street's favorite AI chipmakers post results that exceed even the most aggressive buy-side estimates, the multiple expansion that follows isn't irrational. It's a repricing of the growth curve.

What's notable about this particular rally phase is that it's entering June — historically a month where tech can consolidate before a summer run — with unusual momentum. The fact that a credible geopolitical shock produced a yawn from futures markets suggests institutional investors aren't looking for an exit. They're looking for the next entry. That behavioral dynamic matters enormously for how options are priced heading into the next 60–90 days.

Why Options Traders Should Pay Attention

Here's the options market dynamic that most retail traders miss when they see headlines like this: implied volatility on major tech names is in a peculiar compression phase. You'd expect that military strikes between nuclear-adjacent powers would spike the VIX and inflate IV across single-name tech options. Instead, the opposite is happening — IV is being suppressed by the weight of positive earnings momentum and the market's demonstrated willingness to fade geopolitical risk.

For LEAPS traders, this is a double-edged sword. On one hand, compressed IV means the extrinsic value baked into long-dated options is cheaper than it would be in a fear-driven environment. A deep OTM call on a large-cap AI play with 12–18 months to expiry priced at $0.03 or $0.05 reflects a market that isn't pricing in a blow-off top scenario. On the other hand, when the catalyst finally arrives — whether it's a surprise Fed pivot, a transformative AI product cycle, or an earnings beat that resets the entire sector — that IV can reprice violently upward, and the leverage embedded in a $0.05 LEAPS call becomes extraordinary.

The timing layer matters here too. June kicks off a period where several major AI and semiconductor names have investor days, product launches, and mid-cycle earnings updates scheduled. Each of those events is a potential IV expansion trigger. A LEAPS position entered at current depressed premium levels gives a trader exposure to both directional upside and potential vega gains if the market stops yawning at risk and starts repricing uncertainty. That's a rare dual-catalyst setup.

• IV is unusually compressed relative to the geopolitical backdrop — entry costs are lower than they should be
• Catalyst density is high through Q2 and Q3 — multiple potential IV expansion triggers ahead
• Institutional positioning remains bullish on AI infrastructure, creating a supportive underlying trend for long delta plays
• Premium on deep OTM calls on names like NVDA, AVGO, AMD (AMD), and Microsoft (MSFT) remains in the range where LEAPS scanners are surfacing $0.01–$0.08 opportunities

The LEAPS Angle

Let's get specific about the LEAPS opportunity structure right now. Deep OTM calls on large-cap AI names — think strikes that are 40–60% above current spot price with 12–18 months of runway — are sitting at premium levels that historically appear only during two conditions: prolonged low-volatility grind-ups, or post-crash recovery phases. We're in the former. And when grind-ups get interrupted by a real catalyst, the payoff profile on these positions can be 10x to 50x the original premium paid.

Consider a realistic scenario for a name like Nvidia (NVDA). If NVDA is trading near $1,100 and you're looking at a January 2026 call with a $1,600 strike priced at $0.06, the dollar cost is $6 per contract. For that position to pay off meaningfully, NVDA doesn't need to reach $1,600 — it needs to get close enough that the option's delta expands and the premium reprices from $0.06 to $0.40 or $0.60. That's not a fantasy scenario. That's what happens when a high-momentum AI name catches a second-order earnings catalyst and IV spikes simultaneously.

The challenge for most retail traders is identifying which deep OTM strikes are genuinely underpriced versus which ones are cheap for good reason. This is where tools like the StrikeEdge scanner do the filtering work — surfacing deep OTM LEAPS across large-cap names where the premium is in the $0.01–$0.08 range, allowing traders to focus on evaluating setups rather than manually combing through thousands of option chains. In a market where the AI rally is this broad — touching NVDA, AVGO, AMD (AMD), Marvell (MRVL), and even infrastructure plays like Arista Networks (ANET) — the universe of potentially interesting setups is larger than any single trader can monitor manually.

The names worth scrutinizing most closely right now are those with upcoming product cycle catalysts in H2 2025: next-generation chip launches, AI inference platform announcements, and cloud capex commitments from hyperscalers that directly benefit semiconductor suppliers.

Key Risks to Watch

The market's ability to absorb geopolitical risk isn't infinite. There's a difference between brushing off a contained U.S.-Iran exchange and pricing in a scenario where conflict escalates to oil supply disruption or broader regional destabilization. A meaningful spike in crude oil — say, above $95–$100 per barrel — would hit tech multiples through the inflation and Fed rate expectations channel, and it would hit fast.

Beyond geopolitics, the specific risks for AI-levered LEAPS positions include:

• Earnings deceleration: If Q2 results from key AI names miss on data center revenue or forward guidance, the current multiple compression could be swift and severe
• Regulatory surprise: Export control tightening on advanced chips to China or new AI governance frameworks could reprice sector risk overnight
• Time decay reality: Deep OTM LEAPS lose value every day the underlying doesn't move. If the rally stalls for three to four months, even a correctly directional thesis can bleed out through theta
• Liquidity risk: Some of the most attractively priced deep OTM strikes have wide bid-ask spreads — entering and exiting cleanly requires patience and limit orders

The Takeaway

A market that shrugs at geopolitical strikes while bidding AI chips higher isn't telling you to get reckless — it's telling you where the institutional conviction is anchored. For LEAPS traders, this environment offers a specific edge: compressed IV on names with real, upcoming catalysts, and deep OTM premium that hasn't yet priced in a continuation of the blow-off phase. Position sizing matters enormously here — these are lottery-ticket structures and should be treated as such — but the asymmetry of a $0.05 entry with a multi-dollar outcome isn't hypothetical right now. It's the setup the current market is quietly offering.