Nasdaq-100 (QQQ) – Earnings & Election Hedge – Oct 26th, 2020

Bearish – QQQ – $284.74

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Market Outlook:
Equity markets ended the week holding above major resistance levels on SPY ($343) and QQQ ($282) despite weakness towards the end of the week. Stimulus talks have driven much of the volatility with big earnings reporting next week on major tech names. Fixed income markets have signaled a risk-on environment as high yield and investment grade saw inflows while treasuries sold off. 10-year yields rose above 80bps and commodity prices continued to signal a recovering global economy.

Watch Mike’s QQQ Trade Video on CNBC

QQQ Trade Idea:
On CNBC’s OptionsAction show on Friday, Michael Khouw reviewed tech earnings next week. With expectations on the muted side and record high valuations, Michael suggested an inexpensive hedge to protect portfolios with long positions going into next week and the election. This trade allows investors who have long positions but concerned about the potential of a 5-10% decline in the markets to stay invested. Expecting the market to decline   on earnings and election volatility, Mike is buying a Dec $275/$250 Put Vertical @ $6.12 Debit. 

We’ve structured this trade in OptionsPlay so you can analyze and view this trade along with the supporting technical chart at your convenience.