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Fearmongering is for the Weak

  • Writer: Miqdad Mawji
    Miqdad Mawji
  • Mar 4
  • 2 min read

Trade of the Week: Feb 24, 2025


Surpassing Bearish Sentiments with a Strangle on QQQ

The whole month has been filled with bearish headlines predicting market movements, panic setting in about tarrifs and the lack of rate cuts on the horizon. It's tiresome and unessecary.


It doesn't even matter.


At Urban Bear Capital, we turn market chaos into calculated success. We use our strategic trading framework and a quantitative approach to make gains in any market, regardless of direction.


Let's dive in and show you how.





At Urban Bear Capital, we specialize in turning uncertainty into opportunity. The week of February 24, 2025, was one of the most volatile in recent months, packed with market-moving events:


  • Nvidia Earnings: The AI giant reported solid numbers, but price action remained subdued.

  • Federal Reserve Speeches: Multiple Fed officials provided insights into future rate policy, sparking market swings.

  • Inflation Data Release: The latest CPI and PPI numbers introduced further uncertainty.

  • Geopolitical Developments: Former President Donald Trump’s meeting with Ukraine’s leader created additional market jitters.


With this backdrop, we executed a strangle option strategy on QQQ, buying $525 calls and $500 puts, anticipating large price swings driven by the broader macroeconomic and geopolitical landscape. Our disciplined approach, rooted in mathematics, data analytics, and strategic trading, delivered an 8% net gain as QQQ fell below our put strike price during the week.


Our Strategy: A Perfectly Timed Strangle


Using historical data and statistical modeling, we identified that:

  1. Fed events + inflation data = heightened volatility

  2. Nvidia earnings historically impacts QQQ movement; directionality varies

  3. Geopolitical risk tends to create exaggerated reactions


Our Strategic Framework Looked For:

  • $525 Calls were not too expensive

  • $500 Puts were not too expensive

  • IV levels to capitalize on during large moves

  • Time to Expiry to protect from decay

  • Predetermined exits to prevent excessive drawdowns


Performance Breakdown

  • QQQ Price at Entry (Pre-Earnings): $510

  • Peak Price (Post-Earnings): $520

  • Lowest Price (Geopolitical Event Impact): $490

  • Final Closing Price: $498

  • Net Gain: 8%, as QQQ dropped below our $500 put strike price.



Why This Trade Worked


  • Weeks with Fed Speeches & CPI releases saw average QQQ volatility of 3.8% over the past decade.

  • Nvidia earnings have triggered a 2.5%+ move in QQQ in 7 of the last 10 quarters.

  • Geopolitical headlines have historically led to increased options buying activity, favoring big moves

  • The premiums, time to expiry, required move and greeks all aligned for a perfect storm.





Key Takeaways and Future Outlook


  1. Volatility = Opportunity: Large macro events are ideal for strangle strategies when directional certainty is low.

  2. Risk-Managed Execution: Structuring the trade with calls and puts ensured we captured market swings while mitigating risk.

  3. Data-Driven Precision: Our analytics-driven approach allowed us to time entries and exits effectively.

With the March FOMC meeting on the horizon, we anticipate further trading opportunities in rate-sensitive sectors. Stay tuned as we continue leveraging high-level quantitative strategies to stay ahead of the market.


References

  1. Federal Reserve Economic Data (FRED) – Historical Volatility and CPI/PPI Trends.

  2. Nasdaq ETF Performance Reports – QQQ Historical Earnings-Week Volatility.

  3. Options Market Data – Implied Volatility Trends for QQQ/NVDA Earnings.

  4. Bloomberg Terminal & FactSet – Nvidia Earnings & Market Impact Analysis.


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