Getting Ready for the Stock Market Correction in the US

In this trading brief, we will examine a potential market opportunity from a bearish perspective for the upcoming months of Q3 2025, particularly in September.

Date: August 03, 2025

Asset: Invesco QQQ Series Trust ETF ($QQQ)

Current Market Price: $553.88

Recommendation: Bearish

Strategy: Short Call Vertical Spreads (a.k.a Bear Call Spread)

Moneyness: In-the-money (ITM)

Investment Horizon: Short-term (15 to 30 days)

Exit duration: Close on demand for profit

Market Summary

Since a 90-day pause on US tariffs was announced in April, stock markets have experienced a strong recovery, as evidenced by the back-to-back all-time highs reached since last month. Heading into August, the tariffs were announced without a further delay to a series of countries, although a 7-day extension was given to several countries. U.S. stock markets are trading in an overbought zone and are technically due for a correction. This is coupled with a lack of strong fundamentals in the jobs data revision, far greater than expected during the Non-Farm Payroll data release on Friday.

Historically, there is some deviation present between the first NFP and final NFP data after revisions. However, the data from the last two months showed a deviation beyond expectations. Here's a simple bar chart to illustrate the outlier effect we observed in May and June.

The actual job numbers were 73K, well below the 140K expectations, and a significant drop from the previous month.

Here's a chart that shows how the deviation is getting wider his year. The job market is not as hot as expected, which, of course, forms the basis for key interest rate decisions made by the Federal Open Market Committee (FOMC) and Fed Chair Powell.

The market is shocked by this deviation and has plunged by over 3%, with a gap-down opening across the stock market indices and their corresponding ETFs.

QQQ Daily Chart with a trendline break and a turning down RSI towards the neckline support.

NOTE: The trades shown here are hypothetical and may differ from the actual trade alerts sent. Please consider this brief, which provides an idea of the trade perspective at a scale suitable for large accounts. The trades taken should be well under Max Risk, which is 2% of the account equity. To have a positive expectancy over a series of trades, there should be no deviation from the max risk mandate, which we strongly emphasize for every alert.

Technical Analysis

The QQQ daily chart provides a bearish case after the price had broken a key trendline with the RSI turning down from the overbought levels in a straight dip to the downside, we expect this could trigger a potential bear market for the upcoming months, or atleast stay neutral to bearish for August and a possible drop in September eventually. The MACD isn't presenting a strong case, as it hovers around the mean, indicating uncertainty in direction, as shown by the bottom indicator. This is a weakness, although it may be amplified further if there are continued bearish sessions in the days to come.

Overall, we maintain a neutral to bearish perspective on QQQ as of this writing, and we intend to capitalize on this opportunity through high-reward market trades with minimal risk in option spreads. Let's examine the trade construction and the payoff profile for various market scenarios.

Trade Overview

We sent the below trade alert in our Slack workspace for our members.

QQQ Call Credit Spread Trade Alert

STO - Sell To Open We sell to open the bear call spread as follows:

1. Sell Sep19 543 Call

2. Buy Sep19 544 Call (insurance protection to the upside)

We receive net credit of $72 per contract, while the max possible risk for this trade is just $28 per contract. Max risk is also the margin required by the broker to open this spread. It is easily calculated by taking the difference of the strikes (544 - 543 = $1) and subtracting the credit received upfront by selling this spread at $0.72 per contract, which is $0.28.

Remember that the multiplier for an options contract is always 100 for US options. Meaning, $0.72 is $72 per contract.

• You sell the 543 call and buy the 544 call.

• Maximum profit: $0.72 (if QQQ ≤ 543 at expiration).

• Breakeven: 543 + 0.72 = 543.72.

• Maximum loss: $0.28 (spread width of $1 minus credit; if QQQ ≥ 544 at expiration)

Pro Tip: Re-allocate profits from this spread to finance QQQ mid-2026 call LEAPS before market surge in November

Exit Strategy and Monitoring:

This is a high R-multiple trade with high reward-to-risk potentially, if the stock of QQQ ends up below the short strike 543 Call by expiration on September 19.

This is inline with overall bearish market expectation by seasonality in September. However, we will exit the trade on-demand in profit in the upcoming days. Selling ITM options poses exercise/assignment risks, but this statistically minimal at a 7% chance of exercise before expiry, as per the data provided by CBOE.

In any case, we will do adjustments if that happens and alerts are sent in real time to our members on Slack.

Disclaimer: This trading brief is for informational purposes only and does not constitute financial advice. Options trading involves significant risks, including the potential loss of the entire investment. Investors should consult a financial advisor and conduct their due diligence before executing any trades. Please read the risk disclosure at OCC to understand the risk considerations required to trade options.

Notes on Assumptions: Premiums are based on direct market access tools available at our desks; actual order fills for you as a trader may vary depending upon the time of execution, broker data feed, market access, etc., among many other factors. Charts and technicals exclude fees.