We’re facing a hectic finish to 2025. The Federal Reserve is set to cut rates here in two weeks, we just entered Q3 earnings season, Presidents Donald Trump and Xi Jinping are pounding their chests ahead of the possible October meeting, all the while the historic growth stock rally powers ahead. I think despite the global macro overhangs this AI-led bull market is still in the early stages. But those possible huge returns won’t come without risk and volatility along the way, so it makes sense to put on some downside protection through October to give us some peace of mind. With the current administration’s focus on securing domestic energy, materials, and recapturing semiconductor production market share this rally will not rally in a linear upward direction. We’ve added some strong names to our portfolio that I share weekly here on CNBC Pro. I did just cut last week’s BMNR position, but I am holding tight to Vertiv (VRT) from Sept. 23 , MP Materials (MP) from Sept. 16 , Rocket Lab (RKLB) from Aug. 26 , and Bloom Energy (BE) from Aug. 19 . I see a significant amount of additional upside opportunity in these names, and also names we’ll add in the future, as this historic AI-led should power ahead. In our “fast money” Active Opps account that is holding some of the AI-buildout leaders and quite susceptible to volatility, we need to put some hedges on the Nasdaq-100 ETF (QQQ) . Again, hopefully this “insurance” trade is not needed and we’ll close at a loss. This allows us to not dislodge the nice cost basis we have on the positions mentioned above, gets us that much closer to long-term capital gains status, and avoids the extremely hard task of timing before the selloff and re-entering before the new uptrend begins. I think the key to the one-way rally since April is the 50-day moving average in the dotted blue. There was a test of the 50-day on Sept. 2 this year and then a quick bounce and rally to new high. The concern begins with the possibility we once again test – and do not successfully hold – the 50-day moving average. If that happens I’m not sure what would prevent us from dropping down to the key 2024-2025 breakout zone of $537-$541, which also happens to coincide with a rising 200 day moving average. Chinese trade talks would have to deteriorate quite rapidly for this to occur. I don’t think this is going to happen, but in case I want to have some hedges on. The setup chart is a zoomed in daily chart showing the 50-day moving average just below us at $585. I want to structure this put spread to kick in and start offering protection when and if we break below the 50-day moving average at $580. There is an August double bottom offering a first target of potential support at $560, which serves as a nice step-one downside support target. I’m looking out to the Oct. 31 options to buy the $580 strike put and then sell the $560 strike put. This $20 spread ($2,000 per 1 spread) costs $3.20 as I type ($320). So max profit is $2000 – $320 = $1680 max profit per spread. If you bought 10 spreads for a cost of $3,200 your max profit is $16,800. Adjust the amount of spreads you would trade based on the size of your portfolio you’re considering hedging. If you need help calculating the appropriate size, please reach out to a qualified, active management wealth advisory company. If we do get as far down as $560, we’ll look to close that hedge out and re-establish another hedge to protect us down to the $540 zone. But again, I think the odds are the hedge will not be needed and the AI-fueled bull market powers to new highs into the end of year. Truly exciting times we live in! -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active stock alerts , portfolio management, as well as regular market updates like the idea presented above. DISCLOSURES: Gordon owns QQQ put spreads personally and in his wealth management company Inside Edge Capital. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Source link
