US Markets
Home›US Markets›Sectors›Options trader turns defensive as stocks approach late…
Options trader turns defensive as stocks approach late-summer
With the S&P 500 near 7,700, Jeff Clark expects limited upside, potentially followed by a pullback toward the 7,200-to-7,300 area.
Major indexes are near all time highs and the rally has broadened, but TradeSmith’s Jeff Clark says that mix has made fewer beaten down opportunities available as investors head into September and October, historically challenging months for stocks.
Clark does not forecast the bull market ending, but he argues the risk reward has deteriorated in the near term as valuations are stretched, sentiment is exceptionally bullish, and multiple sectors look overbought. With the S&P 500 near 7,700, he sees only a few hundred points of additional upside, with potentially more downside if the market pulls back.
Rather than moving fully to cash, Clark is shifting how he gets exposure, leaning on call options to keep committed capital lower than it would be with share ownership or broad ETF positions. He says that options are not automatically speculative, but results depend on position sizing.
As an example, he points to the VanEck Semiconductor ETF, SMH, noting that buying 100 shares could require more than $50,000, meaning a 10% decline could translate into several thousand dollars at risk. Clark’s alternative is to buy calls with a much smaller capital outlay, defining the maximum loss to the option premium while leaving additional cash in reserve until the S&P 500 retreats toward the 7,200-to-7,300 range.
Latest closeS&P 500 7,785.76 ▼0.2%