🕒 Market Overview: First Brands bankruptcy exposes $10 billion in liabilities through double-pledged receivables, triggering regulatory concerns across the $1.7 trillion private credit market.

🔄 Sector Insight: Jefferies stock dropped 22.6% in two weeks while put volume surged 92% above normal levels as exposure to collapsed lending platforms surfaces.

💰 Today's Trade Idea: Bear Put Spread on SPY targeting protection against potential credit-driven market correction with favorable risk-reward parameters.

SMART TRADE IDEA

Bear Put Spread on SPY

Trade Setup:  Buy $640 Put / Sell $600 Put, December 19, 2025, expiration

• Cost: $6.00 ($600 per spread)

• Max Profit: $34 ($3,400 per spread)

• Breakeven:   $634 on SPY on December 19, 2025.

Management Plan: Exit at 50% loss, roll down, or take profits if SPY’s price reaches $615 or lower.

If credit declines, and Jamie Dimon is correct about his cockroach analogy, the leading U.S. stock market index could experience some turbulence. A 50% retracement of the move from the April 2025 $481.80 low to the October 2025 high of $673.95 would put SPY at just below the $580 level, below the strike price of the short put option in the $640-$600 December 19 bear put spread. At a risk-reward ratio of over 1:5, the bearish strategy could be optimal in the current environment. 

NOTE: Remember, options trading involves substantial risk and is not suitable for all investors. Consider your investment objectives, financial resources, and experience level before implementing this or any options strategy.

DISCLOSURE: Trade recommendations may have changed since publication. Evaluate current market prices and risk/reward before acting. Trading involves significant risk and is not suitable for everyone. This is not personalized investment advice. Past performance doesn't guarantee future results. Publisher and contributors may hold positions in recommended securities. Readers assume full responsibility for their trading decisions. Consult a financial professional before investing.

If Jamie Dimon is correct and private credit exposure is a brewing disaster, many industries, including automobile manufacturers and dealerships, real estate and mortgage companies, airline and car rental companies, and home furnishing companies that rely on consumer credit, could be on the verge of a substantial downturn. With the stock market indices near record highs and price-to-earnings ratios elevated, a credit event could be a factor that derails the current bullish trend. Moreover, the longer the U.S. government shutdown continues, the more missed paychecks and downsizing in the government sector could exacerbate the credit market problems. Credit defaults could trigger a significant market decline. While it may be only temporary, it may be painful as investors see their nest eggs decline. With the VIX around the 20 level, it could be the perfect time for some insurance in the form of a put spread on the most diversified U.S. stock market index, the S&P 500.

The highly liquid SPY ETF tracks the S&P 500.

As the chart shows, SPY at over $660 per share is not far below the record $673.95 high. Technical support is at the April 2025 low of $481.80. The December 19, 2025, $640-$600 vertical bear put spread at $6.00 or lower has an attractive risk-reward ratio of over 1:5.6.

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