Prune and plant, after the storm: what a sell-off changes for two option trades

An example prepared the day before a sharp fall, and how it looks the day after.

Key information on QQQ. Indicative figures. Source: Saxo, Bloomberg, as of 5 November 2026. Past performance is not indicative of future results.

On 4 November 2026 I had an article ready on a question many investors face when market leadership shifts: how to prepare for a rotation without having to guess when it happens. A rotation is when money moves from one part of the market to another, for example from large US technology companies towards other sectors or regions. After the US midterm elections on 3 November 2026, Saxo’s investment strategy team described several rotations that could take shape. Whether and when any of them happen is unknown.

The article borrowed two gardening terms. Pruning means cutting back a plant that has grown too large, so the rest of the garden gets light; in a portfolio, it stands for trimming a holding that has grown big. Planting means adding something new. A rotation has both sides, an exit and an entry, and the article set out to show how options can attach a price to each side, so that the timing is left to the market rather than to a guess.

It used two strategies as an educational example. On the exit side, a covered call: an investor who owns shares sells someone the right to buy them at a set price, the strike, until a set date, and receives a premium for it. If the shares end above the strike, they are sold there; if not, the investor keeps the shares and the premium. On the entry side, a cash-secured put: the investor agrees to buy shares at a set price until a set date, keeps the cash for that aside, and receives a premium. If the shares end below the strike, they are bought there; if not, the premium is kept and nothing is bought.

The example used QQQ, the Invesco QQQ Trust that tracks the Nasdaq 100, as a large US tech holding, with a covered call at the 740 strike. For the new position it used EFA, the iShares MSCI EAFE ETF of developed-market shares outside the US and Canada, with a cash-secured put at the 100 strike. Both options expire on 18 December 2026.

On 5 November 2026, before the article went out, a storm passed through the garden. This version looks at what the example would have done, and how the same two strategies look at the new prices.

Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it’s crucial to make informed decisions.

One day, two very different gardens

The Nasdaq Composite fell 5.5% on 5 November 2026 and the S&P 500 lost 4.4%, its worst day since April 2025. Chip stocks were hit hardest, on fears that data-centre building slows after the midterm election result, while a Fed official talked about rate rises (Saxo, Bloomberg).

QQQ closed 6.5% lower, about 15% below its 6 October high. EFA fell by less than half as much.

Take a hypothetical investor who had placed both example trades at the 4 November close. The short QQQ call would have gained a little over USD 3 a share, while the shares underneath lost about USD 45 a share. The premium covered well under a tenth of the fall: a partial offset, not protection.

The EFA put roughly doubled in price, a paper loss of about USD 1 a share for the seller. Yet EFA closed above 100, so there is no obligation to buy yet. Neither trade sheltered the investor from the fall; both only set prices.

Option prices rose with the fear: for 18 December 2026 they now point to a QQQ move of about 9% either way, up from about 6%.

Pruning becomes a price for the rebound

With QQQ this far down, 740 is out of reach. A holder who still wants to trim could move the pruning point to the 692 call, roughly where QQQ closed on 4 November: a price for the rebound.

QQQ in SaxoTrader: weekly (top) and daily (bottom), with the 692 call strike and the range implied by option prices to 18 December 2026 shaded. Source: Saxo Past performance is not indicative of future results; figures are illustrative and not predictive.

Selling that call against 100 shares would bring in about USD 9.47 a share, around twice what the 740 call paid. Time decay, or theta, is the daily loss of an option’s value as expiry nears, and the seller benefits from it. The cost is that in a strong rebound the holder sells part-way and misses the rest. The investor retains the full downside risk of holding the shares. The premium received provides a partial offset, but it does not protect against a significant decline in the price.

Example structure (illustrative only - not a trade recommendation)

• Underlying: QQQ (Invesco QQQ Trust), 100 shares held, about USD 64,705 at the 5 November 2026 close of USD 647.05
• Structure: sell one QQQ 18 December 2026 692 call (American-style, physical delivery, 100 shares per contract), strike about 7% above the close and close to the 4 November close of USD 691.95
• Net premium received: approximately USD 947 per contract, USD 9.47 per share at mid; open interest 14,295 contracts (illustrative - verify in live chain)
• Effective exit price if the shares are called away: approximately USD 701.47 (hypothetical, for education only)
• Maximum profit: approximately USD 5,442 per contract if QQQ is at or above 692 at expiry, being USD 44.95 of share gain plus USD 9.47 of premium per share; maximum loss: the full decline of the shares below the break-even of approximately USD 637.58, offset only by the premium (hypothetical, for education only)
• Expected move to expiry: about USD 57, or 8.8% of the price (645 call USD 31.91 plus 645 put USD 25.26, indicative)
• Source: Saxo, as of 5 November 2026 close; indicative quotes after the US close

Covered call on QQQ, profit and loss at expiry. Source: Saxo Past performance is not indicative of future results; figures are illustrative and not predictive.

SaxoTrader order ticket for the 692 call leg, indicative prices after the 5 November 2026 close. The ticket’s risk graph shows the call on its own; with 100 QQQ shares held, the call is covered, and the combined profile is the one shown in the previous chart. Source: Saxo

Strategy insight - pruning. Before the storm, the covered call named a price for selling into strength; now it names the recovery that would be enough, and pays more for it. The shares still carry the full downside.

Options carry a high risk of rapid loss and are not suitable for every investor. Costs and charges apply to each leg and vary by account and venue; check the applicable rates before entering any position.

Planting at the same price, paid more

Key information on EFA. Indicative figures. Source: Saxo, Bloomberg, as of 5 November 2026. Past performance is not indicative of future results.

The entry side keeps its strike. Unlike the UCITS ETFs many European investors hold, EFA has listed options.

EFA in SaxoTrader: weekly (top) and daily (bottom), with the 100 put strike and the range implied by option prices to 18 December 2026 shaded. Source: Saxo Past performance is not indicative of future results; figures are illustrative and not predictive.

Selling the 18 December 100 put would now bring in about USD 179, roughly twice the premium in the 4 November example, with USD 10,000 set aside. The strike sits closer to the market than before, so assignment has become more likely. If EFA ends below 100, the investor buys 100 shares there, an effective entry a little above USD 98. The risk is owning EFA as it keeps falling, and the wide quote means the price received could differ from the mid.

Premiums are higher after a storm because the market expects bigger swings, in either direction. In my view that is a change in the prices, not a reason to act.

Example structure (illustrative only - not a trade recommendation)

• Underlying: EFA (iShares MSCI EAFE ETF), close USD 102.70 on 5 November 2026, down from USD 105.72 on 4 November
• Structure: sell one EFA 18 December 2026 100 put (American-style, physical delivery, 100 shares per contract), strike about 2.6% below the close
• Net premium received: approximately USD 179 per contract, USD 1.79 per share at mid, bid USD 1.49 / ask USD 2.08 (illustrative - verify in live chain)
• Cash reserved: USD 10,000 per contract
• Effective purchase price if assigned: approximately USD 98.21 (hypothetical, for education only)
• Maximum profit: approximately USD 179 per contract if EFA is at or above 100 at expiry; maximum loss: approximately USD 9,821 per contract in the theoretical case that EFA falls to zero (hypothetical, for education only)
• Source: Saxo, as of 5 November 2026 close; indicative quotes after the US close

SaxoTrader order ticket and risk graph for one short EFA 18 December 2026 100 put, indicative prices after the 5 November 2026 close. Source: Saxo Past performance is not indicative of future results; figures are illustrative and not predictive.

Strategy insight - planting. The planting price stayed put while the payment for offering it roughly doubled. The shares would arrive after a fall that may not be finished.

Options carry a high risk of rapid loss and are not suitable for every investor. Costs and charges apply to each leg and vary by account and venue; check the applicable rates before entering any position.

What if the storm is not over

If shares keep falling, the planter would buy EFA at 100 into a decline, and the holder would carry the QQQ losses with only the premium as a cushion. The next known event lands before expiry: the Fed decision on 9 December 2026 at 20:00 CET, with markets now reported to see a December rate rise as likely.

If QQQ instead rebounds sharply past 692, the holder sells part-way. Doing nothing is a valid choice too: a holding the investor is comfortable keeping through a further fall does not have to be trimmed.

Before placing the trade, check:

• Whether both outcomes are acceptable: selling QQQ at 692 and buying EFA at 100
• Position size on each side: one QQQ contract covers about USD 64,700 of shares, one EFA put reserves USD 10,000, so the two sides are sized separately
• The bid-ask spread, which is wide on the EFA put
• Live prices before entering, since quotes after a sharp move can shift quickly
• Events before 18 December 2026, including the Fed decision on 9 December and ex-dividend dates
• Cash available for the full USD 10,000 per EFA put
• USD currency exposure for a euro-based investor
• Tax treatment and account eligibility for US-listed ETFs and options

A note on early assignment

Both options are American-style, so the seller can be assigned before expiry, most often around an ex-dividend date or when the option is deep in the money. The result is the agreed one, only sooner.

Final thoughts

Buying or selling a share bundles three decisions into one order: what, when, and at what price. The example of 4 November 2026 separated them, setting the what and the price and leaving the when to the market.

The storm did not change those decisions; it changed the prices. Whether either is worth setting now depends on how much further movement the investor is prepared to carry, in both directions.

The author does not hold positions in any of the instruments mentioned in this article and is permitted to wait at least 24 hours from the time of the publication before trading the instruments themselves.