After a more than 50% parabolic move in the Nasdaq-100 since the April 8 “liberation day” low, the QQQs have pulled back roughly as profit-taking, Federal Reserve ambiguity and volatility arise. The QQQ this week has fallen more than 1%. I believe that this will be short-lived. Whether the Fed lowers its benchmark rate in December or January is immaterial, as long as the central persists in cutting interest rates. I want to use options to define risk while trying to capture a snap-back rally into year-end. Ever since famed short-seller Michael Burry’s recent put buying trade on both Palantir (PLTR) and Nvidia (NVDA) , volatility has returned — and profit-taking has incurred in the beloved AI themed names. Investors have been more cautious around tech recently thanks to eye-watering valuations. The S & P 500 tech sector trades around 29 times forward earnings, well above the S & P 500’s 22 multiple. Nvidia’s forward price-to-earnings ratio is also roughly 29, while Palantir trades at about 180 times forward earnings. Despite these lofty valuations and the volatility that’s taken hold of the space, AI stocks remain sharply higher for the year. Palantir has more than doubled in 2025, while Alphabet and Nvidia are up 46% and 39%, respectively. But as the AI trade and Fed expectations reprice, it is important to define risk. This call spread is not inexpensive, but it defines the risk as I am optimistic in seeing the rally reignite going into December. The Trade (Buying a Call Spread) Bought the 12/19/25 $600 Call for $19.50 Sold the $625 12/19/25 $625 Call for $8.50 This is a debit spread that will cost $11.00 or $1,100 per one call spread QQQ’s was whipping around $598-$600 when executed DISCLOSURES: Kilburg is long QQQs. 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.
Sunday, February 15
The AI trade is getting a big repricing. This options trade captures a bounce while mitigating risk
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