This options trade generates income and can capture a rip back to records in tech
U.S. equity markets have experienced significant volatility this week (VIX over 25) as AI fears persist. This sell-off in tech stocks is oddly in the face of Nvidia’s (NVDA) blowout earnings on Wednesday. The chip giant reported record third quarter revenue of $57 billion on Wednesday, beating analyst expectations. As markets have tilted back their attention toward the Federal Reserve’s Dec. 10 interest rate decision, the Nasdaq 100 (QQQ) has seen a nearly 8% pullback from all-time highs. As the QQQ knocks on correction territory’s door, I want to produce income and capture a potential slingshot back to record levels. QQQ 5D mountain QQQ 5-day chart Stocks stabilized Friday after New York Fed President John Williams stated that the central bank indeed could cut rates again next month. This moved the CME Group’s FedWatch tool probability from roughly a 40% chance of a 25-basis point cut back up to almost a 75% chance. This acute pullback in AI names, which make up the Magnificent 7, has been led by Meta (META) ; down nearly 30% from its recent highs. While Meta CEO Mark Zuckerberg’s excessive CapEx spending was applauded by shareholders in 2024, we are now seeing some apprehension on Meta’s massive spend. With ROI uncertainty swirling on Meta AI investments, many investors have been booking profits in the high-flying name alongside many other AI related names that have moved lower too: like Oracle (ORCL) , Micron Technology (MU) , NVDA and Tesla (TSLA) . I want to hone in on the 10% pullback level for the QQQ’s ($570) as I believe that this is an area of support and potentially an advantageous entry for those looking for the AI theme to keep moving higher in 2026. The Trade (Risk Reversal) Sold the Dec. 19 $570 Put for $13.00 Bought the Dec. 19 $610 Call for $8.00 This spread will allow an investor to collect $5.00 or $500 per spread QQQ was roughly trading around $588 when executed. Disclosures: Kilburg owns this spread and is long QQQ. 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.
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