US stock markets had a tough day, with the S&P 500 falling by 90 points to levels not seen since August 21. Major companies faced significant losses. Citi dropped by 3.4%, while Freeport-McMoran slid down 3.3%. Blackstone fell 3.2%, and Vistra decreased by 3.1%. Qualcomm also went down 3.1%, Nvidia dropped 2.5%, and United Airlines dipped by 2.3%. Amazon’s value fell by 2.2%.

PepsiCo Gains

Unlike the other companies, PepsiCo stood out with a 4.4% gain in value, thanks to investments from Elliott Management, which bought a stake in the company. Today’s market shows significant pullback, causing fear to creep back in. The CBOE Volatility Index (VIX), a key measure of market fear, has jumped over 30% to trade above 21. This level hasn’t been seen since a brief market downturn in May 2025. Such a spike in expected volatility suggests that buying VIX call options in the upcoming weeks may offer a good hedge. This widespread sell-off links to new data showing that U.S. manufacturing unexpectedly shrank in August 2025 for the second month in a row. Traders are concerned about a possible economic slowdown, which explains the declines in cyclical stocks like Freeport-McMoran and United Airlines. Given this uncertainty, purchasing protective put options on broad market ETFs like SPY could shield against further losses. The impact is especially clear in sectors sensitive to interest rates, with tech and finance giants like Nvidia, Qualcomm, and Citi seeing sharp declines. This reflects growing concerns that the Federal Reserve may keep interest rates higher for longer to tackle persistent inflation from the summer of 2025. This situation makes bearish strategies, like buying puts on the financial sector ETF (XLF), more appealing.

Market Rotation Opportunities

PepsiCo’s strength is a notable exception, indicating a potential shift towards quality and defensive stocks. While economically sensitive firms struggle, funds are moving into stable consumer staples. We can take advantage of this trend by selling out-of-the-money puts on the consumer staples ETF (XLP) to collect premiums amid rising market fear. Create your live VT Markets account and start trading now.

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