Wall Street Prepares For Tech Carnage, 'Disaster' Options Surge - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ)

Wall Street traders are loading up on bearish options that pay off only in a full-blown tech meltdown, not a mild correction, sending a clear signal: the market's spectacular rally might be on borrowed time.

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After rising 43% from April’s tariff-driven lows, the Invesco QQQ Trust QQQ — which tracks the Nasdaq 100 index — is flashing warning signs in the options market.

Traders are increasingly betting on sharp downside, not just minor pullbacks, using so-called deep out-of-the-money puts.

These are contracts that become profitable only if the QQQ ETF falls significantly, which suggests rising fears of a sudden tech plunge.

What's Put Skew, And Why Does It Matter?

The key metric behind this move is called put skew, which measures how much investors are paying for crash insurance – far-out-of-the-money puts – versus milder protection, or closer-to-the-money puts.

When the put skew is high, it means traders are aggressively pricing in tail risks — rare but severe drops.

According to 22V Research, the 2-month put skew for QQQ is now just below its 3-year highs. That spike in skew is drawing attention from institutional investors looking to hedge gains after tech stocks soared this summer.

“I believe with the market up this much in such a short period of time, and all the talk regarding concentration at the top –Magnificent Seven– this skew should be considered when establishing protective hedges at this time,” said Jeff Jacobson, analyst at 22V Research.

All Eyes On QQQ’s 200-Day Moving Average

Jacobson highlighted that the QQQ’s October 2025 put option with a $515 strike is drawing significant interest from traders positioning for a deeper tech selloff.

Why is the 515 level getting attention?

Because it sits right at the ETF's 200-day moving average — a widely watched long-term support level.

It also matches the average size of the last three significant declines in QQQ over the past 18 months: about 12.5%.

Put another way, a drop below 515 wouldn't be out of character for the index — and options traders seem to be betting for exactly that.

“I believe that should we see a pullback in tech that is more than just a shallow one, then the 200-day would be a likely level of support. It also happens to be just above the level where the market gapped higher in May once the tariff deadlines were extended out,” Jacobson said.

Tail-Risk Hedges Are Getting Cheaper

One reason these deep puts are attractive right now is the low cost of volatility insurance.

With the VIX hovering near its lowest levels of 2025, hedging via long-dated puts is cheaper than it's been in months. That's increasing demand for these "disaster" options among traders looking to lock in protection at a discount.

At the same time, concentration in a handful of mega-cap tech stocks has left the broader index exposed to sudden swings if sentiment turns.

Jacobson Sees Opportunity, Not Panic

While the flood of crash protection in tech might signal mounting anxiety, Jacobson of 22V Research suggests the market could be overreacting — and he's not expecting a full-blown collapse.

"I am less in the camp that we see a significant drop from here," Jacobson said.

"Should we see a decline, it would be in the more typical 5% to 15% range." he added.

In his view, the current level of put skew — the premium investors are paying for deep downside protection — is historically elevated and creates a pricing imbalance.

That's why he prefers to sell some of those expensive tail-risk puts and use the proceeds to fund more moderate hedges. This approach takes advantage of the heightened fear without paying top dollar for doomsday insurance.

Jacobson favors ratio put spreads, a strategy that profits in a decline but becomes even more attractive if that decline lands near key technical support, without significantly breaking them.

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