The headline on CNBC.com this morning is “Sell America”. Looking at the recent market activity certainly confirms the headline as there has been a clear rotation out of U.S. growth stocks and into international stock markets, as well as commodities that we’ve covered in this Tuesday column. We’re going to lay out a protection option strategy today to hedge against additional stock market downside. The headlines we’re reading are concerning. But what’s more concerning is that they are starting to be confirmed by the technical positioning of the market. Investors are starting to put their money where their mouth is with actual capital rotation. Could the latest Trump threats of European tariffs over the desire to deepen strategic influence Greenland cause more weakness? I’m not sure. But we don’t have to know the future in order to properly position ourselves today. We just have to know how to put asymmetric reward to risk ratio hedge on or find a money manager who has the chops to do so for you. The SPDR S & P 500 ETF Trust (SPY) made a new all-time high in the first week of 2026, which normally is bullish. What’s concerning, however, is the technical price pattern that formed as the market was making that new high. To my eye, this looks like an “ending diagonal” pattern, which suggests that buyers are running out of energy to push subsequent highs beyond the area of the prior correction. Eventually, the buying power runs out, the bulls are tapped, profit-taking and short-selling bears take over. I’m identifying two trap doors to the downside in the S & P 500 at $679 and $670. If we break both of those levels, I’m concerned a test of the 200-day moving average at $634 is possible. Our hedging option structure will be focused on the relatively weaker Invesco QQQ ETF (QQQ) . As you’ll notice, this market did not make a new high in 2026, while the S & P 500 did. The tech-heavy Nasdaq did not have enough buying interest to push to new highs, whereas the S & P 500 that has more market cap representation of value and cyclical stocks did make new highs. But the spirit of the technical pattern with a flat-top triangle has the same implications. The two trap doors I’m looking at in “the Q’s” are $610 and $600. I’m looking to guard against a drop to the 200 day moving average at $566 in the March monthly options. To deploy this hedge, I’m going to budget out a fixed amount of capital to determine the amount of contracts to trade to properly control risk. A trade to hedge against potential declines The option spread I’m looking at is the March 20th, $595 / $565 put debit spread. Buying the $595 put strike, and selling the $565 put strike for a total cost (max risk) $569 per spread as shown in red text on the PnL graph below. The breakeven on this transaction is $589.30 on March 20th, and the max reward is if the QQQ is at $565 or below for a max gain of $2,431. Risking $589 to make $2431 is a good risk/reward ratio. Here’s a way to think about calculating the right amount of spreads to hedge. The drop from current levels to the 200 day moving average is about 7.50%. Let’s say you have a $1 million dollar portfolio you are looking to hedge. If we assume a 1-to-1 correlation of your portfolio with the Nasdaq 100 you face a potential 7.5% loss, or $75,000. If the max gain on the option spread is $2,431, you would need to hold 31 option spreads to generate at least $75,000 in profit. 31 spreads * $2,431 max profit = $75,361. Or, let’s say you want to hedge half of your portfolio’s exposure, then you could buy 16 spreads for one-half the cost. Do I think we’re headed lower and we need to definitely hedge our portfolio? No, my gut says this is another whipsaw headline that is actually a buying opportunity as we get further along into Q4 earnings. But risking $589 to possibly make $2431 for a risk-reward ratio of 1-to-4.1 is a good way to hedge against my bullish trend-following, headline discounting bias. After I publish this, I’m going to begin deploying this hedge in our client’s managed accounts. — 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, here . DISCLOSURES: By the time you read this article, Gordon will own the QQQ hedges 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, or its 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 CONSTITUTE 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.
The ‘trap doors’ to watch in the S&P 500 and Nasdaq as trade pressure mounts, according to the charts
Jan 20, 2026
![i’m-nervous,-too!-[part-2]](https://10xwealthreport.com/wp-content/uploads/2026/03/177042-im-nervous-too-part-2-1568x784.jpg)
