Options Sir's Macro View | Is it a rebound or reversal? In a volatile market, small position bottom-fishing + recovery methods are the most appropriate!

Hello fellow investors! These past few days have been really tough.The other day, the impact from the Middle East conflict caused accounts to 'bleed,' with declines during the day followed by further drops at night.

However, last night, the three major indices collectively rebounded, $Dow Jones Industrial Average (.DJI.US)$ closing up 0.49%, $Nasdaq Composite Index (.IXIC.US)$ closing up 1.29%, $S&P 500 Index (.SPX.US)$ closing up 0.78%. Is the light of hope here? Not so fast! Let’s first look at the following important information:

Is the light of hope here? Not so fast! Let’s first look at the following important information:

1. The three major indices collectively rebounded— is it time to buy the dip?

Judging from yesterday's intraday performance, the market is in a state ofemotional recoveryphase. $NVIDIA (NVDA.US)$ 、 $Tesla (TSLA.US)$ led the rebound, with cryptocurrency-related concepts $Circle (CRCL.US)$ 、 $Coinbase (COIN.US)$ bouncing back as the market re-entersa rapid sector rotation,but some recent macro events will still have significant potential impacts:

1. Middle East conflict and the Strait of Hormuz: tense but controllable

while due to risk aversion expectations, $Brent Last Day Financial Futures (AUG6) (BZmain.US)$ oil prices surged from $65 to over $80, butthe market's pricing of crude oil remains restrained,as the market is still betting on a de-escalation and has not priced in the worst-case scenario;

The current Polymarket betting odds for a ceasefire before April have decreased, but the probability of a ceasefire by June is at 71%. With Trump's midterm elections approaching, if the conflict intensifies and oil prices rise, it would be reflected in gasoline bills paid by the American public, causing dissatisfaction in polling — a situation Trump does not want to see.

In summary,The mainstream market expectation for the conflict has shifted from a quick resolution to a prolonged, medium-to-long-term ongoing conflict.Affected by the blockade of the Strait of Hormuz,Rising energy prices → increasing inflation expectations → decreasing expectations for Fed rate cuts, which may hinder the further recovery of the stock market.

2. Non-farm payroll data will be released soon

On Friday, March 6, the US will release its February non-farm payroll data. Due to seasonal effects in February,The market expects an increase of 60,000 in non-farm payrolls.If the actual disclosed figure is significantly higher than expected, the market’s rate cut expectations will be lowered again, putting pressure on high valuation sectors (such as tech stocks).

Options Sir has also outlined several representative scenario analyses for fellow investors' reference:

It should be noted that: the叠加of multiple major events means tail risks cannot be ignored!Although large-cap stocks are relatively stable at the bottom, an escalation in geopolitical conflicts could lead to downside risks for high-valuation sectors like tech stocks. Therefore, it's crucial tomake sure to deploy and implement protective measures in advance.！Instead of checking your holdings every day with anxiety, it's better to hedge properly and enjoy life peacefully.

2. What should you do at this stage?

1. If you hold index or tech stocks and are stuck but unwilling to exit,

and don’t want to liquidate your stock positions, you can use options toenhance your risk-return profile.If you hold the underlying stock, you can sell call options (Call) at higher strike prices to create a covered call strategy that generates premium income to offset losses.

Position: Holding stock + selling Call

If, by the time the option expires, the stockhas not risen above the strike price,: The option expires worthless, and you keep the full premium, which you canRepeat the Covered Call operationCollect option premium income;

If the stock price surges before the option expires,The Call is exercisedYou sell your stock position at the strike price,Take profit and exit the market；

(The design image displayed on the screen is for demonstration purposes only and does not constitute any investment advice or guarantee; market conditions fluctuate frequently, and the illustrated option prices do not represent real situations)

If you were previously stuck in a losing position, you can chooseUse the original purchase price of the stock as the strike priceSell a Call.While waiting for the stock price to recover, you can earn additional income through option premiums.

2. If you hold crude oil or energy stocks and have made profits but are worried about giving back gains

Then a collar strategy is more suitable. While continuing to hold your stocks for potential upside:

Buy a Put option below: if the stock price falls, this allows you to cut losses and exit;

Sell a Call option above: the premium received can be used to buy the Put, and with appropriate strike prices, you might open the entire options position at zero cost;

3. If your main position is stable or you are in cash and looking for opportunities to pick up stocks at lower prices

The current situation remains unclear, and taking large positions to buy stocks at their lows could expose you to downside risks. Therefore, it may be better to use small positions to write Put options at your desired entry price.

If the option expiresand the price hasn’t fallen below the strike price: The option expires worthless, and you keep the full premium, which you canrepeat the short put operationCollect option premium income;

if the price falls below the strike price before expiration,the option will be exercised,Youand you will spend cash at the strike priceto buy the stock.

It should be noted that: selling put options must be backed by sufficient margin as collateral, otherwise, there is a risk of forced liquidation.

One more thingTo gauge the market's expectation of macro volatility, you can take a look at $CBOE Volatility S&P 500 Index (.VIX.US)$ . Although the VIX has retreated somewhat, it remains at a high level.I hope all fellow investors can remain calm during times of heightened volatility. Don’t blindly sell stocks when the VIX peaks; instead, use derivatives as a tool to hedge short-term tail risks so you can benefit from future upward trends~

$Invesco QQQ Trust (QQQ.US)$$SPDR S&P 500 ETF (SPY.US)$$United States Oil Fund LP (USO.US)$

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Disclaimer

This content does not constitute any offer, solicitation, recommendation, opinion, or guarantee regarding any securities, financial products, or tools. The risk of loss in trading options can be significant. In some cases, the losses you incur may exceed the initial margin deposit. Even if you set contingency orders such as “stop-loss” or “limit” orders, these may not necessarily prevent losses. Market conditions may render these orders unexecutable. You may be required to deposit additional margin within a short period. If you fail to provide the required amount within the specified time, your open positions may be liquidated. However, you will still be responsible for any deficits in your account. Therefore, before trading, you should research and understand options and carefully consider whether such trading suits your financial situation and investment objectives. If you trade options, you should familiarize yourself with the procedures related to exercising options and the expiration of options, as well as your rights and obligations when exercising options and upon their expiration.

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