TACO Trade: Investing Opportunities and Risks in Hot Markets (Options Strategy Guide)

How TACO Trade Drives the US Stock Reversal?

US stocks were all up last night on the three major indexes, $Nasdaq Composite Index(.IXIC.US)$ A stronger increase of 2.2%; $S&P 500 Index(.SPX.US)$ +1.6%; $Dow Jones Industrial Average(.DJI.US)$ Increase 1.2%. The three major indexes have seen a drop of about 50~ 60% over the last five weeks, and the main one is due to TACO Trade sentiment. U.S. President Donald Trump said the heat on the latest China-US trade war led Morgan Stanley to warn that the two countries could not resolve their trade dispute until early November, and that US stocks or an adjustment of up to 11% could not prevent a TACO deal.

From the perspective of the sector, the market is not completely oblivious to trade-related risks, for example, and the strong sector of the Industry Chain and Trade Risks, has been in hot weather today. $MP Materials(MP.US)$ The yen rose by 20% again, and the increase from the beginning of the year to this year has increased by more than 500%. Eliminate the heat from the Earth, causing the Energy Industry Chain of Ai to heat up to 10 degrees. $Bloom Energy(BE.US)$ The year-to-date increase was 26%, up nearly 400% from the beginning of the year. The above two stocks are just one of the hot spots, and not least the mid-sized stocks in the AI Industry Chain are showing signs of an upswing.

AI Industry Chain Hot Fryer: Unraveling TACO Trade's strategy

Take a closer look, $Russell 2000 Index(.RUT.US)$ Continued are the three traditional indicators of US stocks. In the third quarter of 2025, Lotus 2000 is up 12%, and the Nasdaq Composite Index is up 11.2% over the same period, the S&P 500 Index is up 7.8% and the index is up 5.2%. Rosen 2000 is the leading mid-size stocks that track US stocks. Market Cap is typically between $0.3 billion and $10 billion. The main reason for these small and medium stocks is strong because the market is looking forward to a single event, such as large orders or aggressive cooperation, these events have a greater impact on the market for small and medium stocks, while reflecting the market's current weakness.

The market's woes are not only in mid-size stocks, but large stocks are showing up. Another example is $Broadcom(AVGO.US)$ 。 Broadcom and OpenAI announced a deal to divest from 10GW's Baton AI chips, a news that caused the share price of Broadcom to rise by 10% on the day. Bullish people are looking forward to seeing the diving development of the Broadcom and ASIC markets at the same time, but it also reflects the prevailing state of the market in the future regarding such cooperation. In the event, after Broadcom's public announcement in early September, the announcement of the Q1 billion IPO was announced at the Earnings Reports conference. Analysts had expected that OpenAI would be a new US$ partner of Broadcom, and this recommendation would be confirmed directly after the announcement of the official cooperation plan. The 10K Broadcom AI chip and the iconic customer identity are the main reasons behind the surge in its share price.

TACO Trading Mid-Market Highlights and Risks

Remove Broadcom, ban OpenAI, $NVIDIA(NVDA.US)$ 、  $Advanced Micro Devices(AMD.US)$ WAKOTONG'S INVESTMENT HAS ALSO BEEN THE FOCUS OF THE MARKET RECENTLY. These companies invest in each other and in different areas, resulting in very optimistic expectations of one-time gains in the market. However, huge developments are difficult to predict when large and cash flows generated. This results in two factors:

1. Currently, these Stocks have been above Analysts' Target Prices for a long time (Analyst Ratings feature for reference to cattle)

2. The emergence of AI bubble speech

Students recognize that the current AI Industry bubble is in the first place, and the application development of AI is highlighted in the previous article, and it is not within the scope of my personally recommended investments. This is why the article mentioned above, and if you do not know what is relevant in the news, Taiwan Semiconductor is the best choice, so that it can benefit from the development of the entire Industry Chain. SwallowAI Hot Investment Opportunities: Is Taiwan Semiconductor the Ultimate Winner in Demand for Power? 」

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TACO Trade Short-Term Events to Look Out For

AI's development outlook is natural, but it is important to pay more attention to those who love the short-line market. From now on, as TACO Trade takes place, the volatility of the market at the beginning is extremely high, representing a high level of market risk from the past. For now, the main thing about shorting the market is not bubble risk, and it is not recommended to follow the emotional way of trading, light stocks are only recommended for investing in ultra-short lines, such as ETFs. $ProShares UltraPro Short QQQ ETF(SQQQ.US)$ As a short-line hedge.

In the short term, U.S. stocks can watch out for the following important events to determine your actions

1. The Importance of China-US Trade and Discussion, the Continuity of TACO Trade Affair

2. The continuation of the US government shutdown, the market sees October 15 as a key day, with the main focus on whether the US military will be able to deliver food as expected

3. AI Industry Development and News, Market Aggressive Cooperation, M&A or Bulk Order Response

4. Risks of Geospatial Policy, Impairment of Precious Metals and Nonferrous Metals Prices

5. Cryptocurrency market developments in the wake of the crash

Best options strategy for TACO Trading strategy

Under the TACO Trade Concept, it is not recommended to keep track or idle. In addition to some of the major Stocks or Indices close to the VIX index's upside, a more cautious Protective Put strategy is the best strategy for dealing with the risk of short lines.

$Invesco QQQ Trust(QQQ.US)$ The Protective put strategy as an example

(The options chart above is for reference only and does not constitute an investment opinion)

Using the chart above as an example, this strategy is to hold or buy a QQQ of 100 shares while simultaneously buying a long a put option. The main objective of this strategy is to use Buy options as insurance, when one market occurs without the materiality of one market, the method of execution can be used as insurance, and the stock stocks on hand can be used by the method of execution when the reverse occurs. Limit the maximum damage. At the same time, only the share price continues to rise during the options maturity date, which can be attributed to the subsequent increase in the share price.

For more discerning investors, a low-risk options strategy can also be used to reduce countervailing costs. In Beef Options Trading, select Collar options combination on the strategy. Using NVIDIA as an example, it is used to hold or buy 100 shares while simultaneously buying a long and short a call option.

(The options chart above is for reference only and does not constitute an investment opinion)

The biggest difference between this strategy and Protective put is to buy a long a put and short a call at the same time to reduce countervailing costs. The price is when the price of the fruit cannot be fully enjoyed during a rise in the share price. To put it simply, this strategy is a hybrid strategy of traditional covered call+protective put.

People are aware that there is a risk of a short line in the future, since the above options strategy is correlated with the large strategy against the Large Stock Stocks or Indices, the correlated time does not use the longitude, this can reduce the low or index number, while the opposite time does not use the length, this can be reduced. The associated cost of buying options. At the same time, the graph remains flexible in operation.

Futu Securities, Chief Analyst, Hui Chi-Lok

(The author is a licensee of the Securities and Exchange Commission and its affiliates do not have any financial interest in the proposed issuer of shares)