Subscribers to Chart of the Week received this commentary on Sunday, March 16.

I loved ‘Choose Your Own Adventure’ books as a child. With the reader deciding the character’s destiny, there was a simple comfort knowing you were in control of the outcome. I’ve thought about those books when assessing the fallout from the last month on Wall Street. For anyone with a vested interest in the stock market, remembering that you’re still in control is a necessary reminder right now.

But this isn’t fiction; if you’re an active investor, you have choices to make about the future. What better way to help illuminate the path forward than with a stock market choose-your-own-adventure?

This tech correction is a much-needed washout, and there’s now an array of discounted growth stocks in oversold condition. Do you agree?

If yes, continue below. If not, go to The Brutalists

The Optimists

Congratulations, you are one steadfast optimist with a steel resolve. Big Tech, long the harbinger of new highs, is suddenly a bargain bin overflowing with opportunities. The Invesco QQQ Trust Series 1 (QQQ) may be down 8% year-to-date, but its relative strength tested 30, and the previous dips to this level preceded frantic comebacks, per the chart below. Amazon.com Inc (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL) are holding their $2 trillion market cap level, and their 320-day moving averages are right there to catch any additional weakness. Nvidia Corp (NASDAQ:NVDA) just bounced off its own 320-day earlier this week. Meta Platforms Inc (NASDAQ:META) is testing $1.5 trillion and its 200-day trendline.

All these technical pillars are intact while short interest and negative sentiment piles on. Per Senior Quantitative Analyst Rocky White, short interest on S&P 500 Index (SPX) components and Nasdaq-100 (NDX) is up 2% and 1.6%, respectively, in the most recent reporting period. For the SPX, this ranks in the top percentile of its 12-month range. The latest American Association of Individual Investors (AAII) poll measures bullish sentiment at 19.1%, the lowest reading since September 2022. If you view the SPX correction and Big Tech fire sale as a momentary washout, a capitulation of overweight valuations that will soon bounce back, then this sentiment shift is a green light. If you believe Trump tariffs will do everything the President says, that American exceptionalism will win out, crypto will create a new wealthy class, and artificial intelligence (AI) will revitalize the labor market, then stay the course and scoop up the discounts across the board. Even if you believe none of those things but are bullish on the stock market regardless, this selloff presents a massive setup for an eventual unwind once the correction finds a bottom.

Welcome, realist. You believe that Trump trade war volatility is the spark igniting an overgrown tech sector. The ‘Trump Put’ is real; the administration’s focus on the bond market and reducing debt is a departure from its first term, when the President watched the stock market like a hawk. Now, in an effort to ‘balance the budget, the administration seems willing to let the stock market unwind through tariffs. But that, as many economists have warned, could trigger something more serious.

The forest is primed for its brush fire, and you need portfolio protection. Some sectors are partially insulated from tariffs. We’ve discussed safe-haven assets like gold in the space to start this month -- VanEck Gold Miners ETF (NYSEARCA:GDX) is up 8% since that article was written. Consider this FinViz SPX heat map from the last month. Safe, consumer cyclicals treaded water while tech crumbled. Boring old Verizon Communications (VZ) was a monthly winner, as were the long-time heavy hitters in the defense, energy, and healthcare sectors.

You view all this pessimism and sentiment shift as a permanent pivot to a recession. You’re not alone. Over 600,000 QQQ puts were added on Thursday alone. SPX puts are, per the table below, on the rise but well off their 2024 highs and still on the subdued side looking back to early 2023. The p/c ratio of the Magnificent Seven, as tracked by Senior Market Analyst Chris Prybal, briefly crossed 0.7 but has since pulled back. What these ratios say to the Chicken Littles out there is that while there’s obvious pessimism permeating the market, there’s still room for bearish exposure, and the worse this gets, the more it will snowball into something out of control.

That was a fun exercise to remind myself and hopefully others that stock market sentiment is in the eye of the beholder and depends on your risk appetite. Everyone’s different. To a 35 year old building his life, they can ride out.

Unlike the books from my childhood, this adventure has the same ending. Volatile short-term options contracts are answering the bell in this whipsaw market climate. Trading volume in SPX-linked options surpassed 4.8 million on Monday, the highest level on record, per Cboe data and up 50% from the year-over-year daily average. MarketWatch called 0DTE contracts – which accounted for 56% of total activity in the S&P 500 complex in February, the largest share for any month on record – ‘lotter tickets.’

CME Group also reports an increase in weekly options on gold, silver, and copper futures, the surest sign yet that safe-haven assets are en vogue right now. All of this is to say that whatever your outlook on the stock market in the near and long term, there will be a way to take advantage of it with options. And while the implied volatility (IV) crush that usually comes with earnings season winding down may not be as robust given the uncertainty permeating the market, consider the array of strategies –credit spreads, covered calls, selling iron condors – there are ways to squeeze the most out of a shaky system.