Since the second half of this year, the previously soaring US stocks have suffered frequent setbacks, with increasing uncertainty factors from the fluctuation of interest rate expectations to the unexpected US election, from chip export restrictions to Microsoft's global malfunction. With the peak of the Q2 earnings report approaching this week, the performance of technology giants is starting to be "market-tested", and the market volatility has once again intensified.

Tesla and Google, the first two companies to release their quarterly results in Mag7, did not meet expectations, triggering investors' pessimistic emotions about the AI bubble, which resulted in panic selling in the US stock market. The S&P and Nasdaq touched their largest drop in more than a year, and Nasdaq100's market capitalization evaporated by trillions of dollars, with no exception for the seven giants. On the structure of products, the operating income of products within the range of 10-30 billion yuan was 401/1288/60 million yuan, respectively.

At the same time, the VIX, Wall Street's most watched market volatility index known as the "Fear Index," surged 22% overnight, ending a period of low volatility that had lasted more than two months, reaching a new high since April.

Buy the dip or stop loss? Trading risks are worth paying attention to.

Over the past year or so, the U.S. stock market has been hot under the influence of AI, but stock valuations have skyrocketed as well. During this round of earnings season, investors are paying close attention to the growth of technology stocks in order to determine whether their valuations are too high. When the market expects "too much", any "flaw" in the financial report may cause concern. In addition, technical overbought and political uncertainty can also contribute to the situation.

Industry insiders point out that the technology sector is a sector of the U.S. stock market that has grown rapidly in recent years, attracting a large amount of global capital. Therefore, this will be the key to the overall risk sentiment of the stock market, and the trading risk of this sector over the next period of time is worth paying attention to.

Steve Clayton, head of stock funds at Hargreaves Lansdown, said: "Mid-term earnings season has already begun, and so far, investors are disappointed with what they have seen. Investors question whether the huge amounts of money invested in AI can really generate returns."

Morgan Stanley Funds said that the market rarely rises in a straight line, with a roughly 10% correction occurring about once a year in history, and last year's correction occurred in the fall. This year, the market may experience such an adjustment since the downward trend in inflation since the summer faces challenges, and the wavering of interest rate reduction expectations will cause differences among investors.

However, people in the options market believe that the current decline is more like an orderly retracement than a collapse.

Matthew Tym, head of stock derivatives trading at Cantor Fitzgerald, said: "We don't see too much fear in the market. It's a very orderly and passive state. In my opinion, this indicates that no one is currently in trouble." He said that although there has been volatility recently, strong market returns over the past few months may put investors in a favorable position, allowing them to withstand moderate volatility.

The market's volatility risk has not been completely released, and whether technology stocks can stabilize in the coming weeks will be crucial. The US second-quarter domestic product (GDP) report to be released on Thursday and the June PCE price index to be released on Friday will provide more clues to the Federal Reserve's interest rate path and the future of the US economy.

In the meantime, shifting from large-cap stocks to cheaper sectors in the market may help alleviate concerns about market concentration. No matter how long it lasts, selling will eventually provide investors with another buying opportunity. For investors, whether buying on the dips or choosing to stop loss, good position management and trend investing are very important.

How to use risk hedging to protect long positions?

There are also many hedging tools in the U.S. stock market that can diversify the risks of long positions.

Tech giants like Tesla and NVIDIA, as well as semiconductor and large-cap indices, all have leveraged inverse ETFs with different multiples, such as:

• Tesla Leveraged Inverse ETF:$DIREXION DAILY TSLA BEAR 1X SHARES (TSLS.US)$,$Tradr 2X Short TSLA Daily ETF (TSLQ.US)$;

• NVIDIA Leveraged Inverse ETF:$Direxion Daily Nvda Bear 1X Shares (NVDD.US)$,$GraniteShares 2x Short NVDA Daily ETF (NVD.US)$;

• Semiconductor Index Leveraged Inverse ETF:$Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS.US)$,$Proshares Trust Ultrashort Semiconductors New 2020(R/S) (SSG.US)$;

• Technology index inverse ETF:$ProShares UltraPro Short QQQ ETF (SQQQ.US)$,$Direxion Daily Technology Bear 3X Shares ETF (TECS.US)$;

In addition, there are also ETFs that bet on the rise in S&p 500 index volatility and are linked to the "Panic Index" VIX:

• $ProShares Ultra VIX Short-Term Futures ETF (UVXY.US)$,$ProShares VIX Short-Term Futures ETF (VIXY.US)$

The VIX panic index and the stock market are generally negatively correlated. When the VIX index is below 15, it means that the market may be overly optimistic, leading to overvaluation and the possibility of selling pressure or market killing. As the market often falls sharply with a sharp rise in the VIX index, many traders choose VXX or UVXY as tools for short selling or hedging.

It is worth noting that once a downward trend is confirmed and uncertainty is resolved, even if the market continues to decline, betting on VIX may not achieve the goal of shorting the market.

In addition, for holding users, they can also choose to sell and use the covered call strategy to obtain additional option income to offset the losses caused by individual stock declines.Call option strategy (Covered Call) to generate extra option premium income and offset losses from stock declines.To obtain additional options income to offset losses from individual stock declines.

Dear mooer,

How long do you think this round of US stock sell-off will continue?

Will you choose to hold or sell?

Welcome to leave a comment in the comment section for discussion~

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