US Equity Derivatives Strategy: Q3 Earnings Volatility, Trading AI Rotation Beneficiaries into Reporting

J.P. Morgan expects S&P 500 3Q EPS to rise ~24% y/y, which looks elevated but is achievable: excluding NVDA and MU the hurdle falls to +15%, and the median company is expected to grow a more modest +8%, with global PMIs at multi-year highs and earnings breadth improving. Implied earnings-day moves screen elevated (~80th percentile) at 6.8% on average versus 6.6% realized over three years, rich in Utilities, Energy and Materials but cheap in Staples and Communication Services. With high-beta upstream AI names sold off on datacenter capex, neocloud leverage and memory pricing concerns, the team avoids exposed AI for now and instead trades segments benefiting from improving breadth and rotation: XRT and JP2RTL call spreads plus single-name call spreads on sold-off consumer stocks to express consumer resilience; worst-of calls on AMZN, GOOGL and MSFT for cloud beats and rotation into "Quality AI"; and AMZN call spreads plus short-dated calls on HWM and T.