Last week was a brutal one for traders. On Monday, stocks closed their worst quarter since 2022 with the S&P 500 down 4.6% in Q1. Then came President Donald Trump’s tariff announcement on Wednesday night. We witnessed a historic sell-off with trillions of dollars in valuation wiped out. The S&P 500 screamed another 10.6% lower — a correction-level drop in a mere 48 hours.
The Nasdaq closed the week in bear market territory, down 22.9% from its Dec. 16 high. And the S&P 500 is one more bad day away from following suit, ending the week down 17.5% from its Feb. 19 all-time high.
We’re feeling the pain in many positions, yet we still managed to net more than $5,000 in cash in the live account.
Here are all of the closed trades from the week of March 31-April 4:
This included long call positions from Markay Latimer’s Options Player Workshop. While two of those directional bets did not pan out, the Amazon (AMZN) win more than offset those losses.
Not surprisingly, though, most of last week’s winning trades had a bearish bent. We found more success with bear call spreads on the SPDR S&P 500 ETF Trust (SPY) and the Russell 2000 (RUT) in the 5K Challenge program, once again booking hundreds of dollars in profits in less than 24 hours.
We also traded SPY bear call spreads in the Income Masters program. Given that we scaled up to 10 contracts apiece in the live account, we managed to generate a combined $2,180 from those trades last week. This brings our total cash to $4,165 from trading this strategy since late October.
For more on how and why we’ve been using this alternative hedging strategy to bank profits without needing to perfectly time the market, check out the March 24 Weekly Income Report.
Given the rampant uncertainty in the market, with the CBOE Volatility Index (VIX) spiking to levels not seen since the peak of the COVID-19 pandemic, we are likely to continue to focus on the bearish side, especially with ETF and index trades.
But the trade we want to look at a bit closer this week actually utilized a neutral options strategy – the Invesco QQQ Trust (QQQ) straddle from the Millionaire’s Trading Club VIP program.
A straddle involves simultaneously buying both a call option and a put option on the same underlying asset, with the same strike price and the same expiration date. The trader stands to profit if the price moves substantially in either direction by expiration.
It is a neutral tactic in that you’re not betting on the direction of the price move, only that a significant move will occur.
Since this is an options-buying strategy, you pay a net debit to establish the straddle (the cost of the call plus the cost of the put). This debit is your maximum potential loss.
If the underlying’s price goes significantly above the strike price, the call option will become profitable and the put option will expire worthless. If the price goes significantly below the strike price, the put option will become profitable and the call option will expire worthless. The profit potential is theoretically unlimited (minus the initial cost of the straddle).
Straddles are positively correlated with volatility. An increase in implied volatility will generally increase the value of both the call and put options, making the straddle more valuable.
Time decay, on the other hand, works against a straddle buyer. As time passes and the expiration date approaches, the value of both options will erode, even if the underlying price hasn’t moved much.
But that wasn’t an issue for our QQQ trade. We entered the position on Friday morning during the Millionaire’s Trading Club VIP live trading session. At the time, QQQ, an ETF that tracks the Nasdaq 100, was trading at $433.58.
Given the current trading environment, we wanted to keep this a very short-term trade. We bought to open the at-the-money QQQ 9 Apr 433 Call and the QQQ 9 Apr 433 Put, buying two contracts in the live account at $21.33 apiece.
In addition to going out just five days, we set a fairly conservative target exit price of $23.50, hoping to get out of the trade with a 10% return in short order. Just how quickly this happened, though, surprised even us.
As the day progressed, the Nasdaq 100 continued to collapse and volatility continued to spike. This combination caused the value of the put option we bought to explode, more than offsetting the decline in the price of the call, and we hit our target exit price in less than 5 hours, booking a $434 profit on two contracts.
Two of our other trades from the Millionaire’s Trading Club VIP session – bear call spreads on the Technology Select Sector SPDR Fund (XLK) and iShares Russell 2000 ETF (IWM) – came close to hitting their target exit prices on Friday. If stocks continue to decline this week, they are likely to trigger soon.
We also made a bet on volatility continuing to rise with a diagonal call spread on the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX).
In addition to all of these trades being designed to take advantage of bearish market conditions and elevated volatility, they are all on exchange-traded funds.
This was a strategic move as ETFs – both those that track market indices and those that track individual sectors – are a way to reduce risk compared to individual stock due to their diversification and liquidity.
If you’re looking for some ETFs to trade amid the market chaos, here are some that we’ve been considering:
Just be sure to keep your expirations short and your positions small. This is no time to go all in. And consider strategies such as the neutral straddle, which eliminates the need to correctly predict which way stocks will go next.
