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If you want to survive—let alone thrive—in this market, you better understand two words: hedging and preparation. Two market truisms spring to mind: Market sell-offs aren’t always straight lines down, and position now for the rebound. This is where too many retail traders get blindsided because they're either too bearish too late or too bullish too early—and neither helps you make money. Let’s get into it.

Now, look. When people talk about sell-offs, they picture the market crashing overnight. But most of the time? That’s not what happens. Instead, we get what I call a “grind lower”—a drawn-out, frustrating pattern of choppy down days, peppered with a few strong up days just to keep you guessing. Retail gets sucked in every time. They say, “Hey, we’re bouncing!” and jump back in—only to watch the market roll back over. Institutions love this. Why? Because they’re already hedged. They’re delta comfortable, meaning they’ve already offset their risk through options, futures, or inverse ETFs. They don’t care if the market goes down. 

They’re not stressed. But retail? Retail’s out here swinging without a helmet. So what do you do? 

You get hedged. You get your delta under control. Maybe you layer in a 30-delta put on SPY to bring down your beta-weighted delta by a third. Maybe you sell call spreads to finance it. I walked you through this exact hedge this week—because when the market does sell off, you don’t want to be reacting. You want to be rotating.

And that takes me into Point 7—you prepare now for the rebound. Let me say this clearly: you do not wait until the market is screaming higher again to start hunting for leaders. You start identifying the names now. The stocks that lead us out of sell-offs are usually the ones with high beta and high short interest. We’re talking about names like SMCI, Tesla (TSLA), MCHP—names that institutions have been shorting, that now have to cover when the tide turns.

What causes that tide to turn? Sometimes it’s a 90% down day—like what we just saw. That kind of flush sets the stage for short squeezes and gamma squeezes, particularly in names that already have speculative positioning. So yes, while you’re hedging your downside, you’re also building your cheat sheet—your list of stocks to pounce on when the bottom forms.

It’s not schizophrenia, folks. It’s called being nimble. You hedge like a bear but position like a bull. You stay on the balls of your feet, not flat-footed. The bottom doesn’t announce itself with a press release. But if you’re watching volume, breadth, and volatility structures, you’ll see the signs. And when you do? You need to be ready to flip the switch.

That’s the game. Stay defensive while you scout offense. The ones who can’t make that transition? They’re the ones always buying high and selling low. Don’t be them.

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