🕒 Market Overview: QQQ dropped 25.6% lower from the February 2025 high to the April 2025 low, over a period of eight weeks. With over four months until expiration, a highly volatile economic and geopolitical landscape, stocks at record highs, lower liquidity during the summer months, and the midterm elections on the horizon, there is a compelling case for the $700-$650 bear put spread on QQQ with a 1:2.85 risk-reward ratio. A 20% correction from $740 would take QQQ to under $600, far below the short strike in the $700-$650 bear put spread for mid-October expiration, when uncertainty over the midterm elections will be peaking.

📈 Sector Insight: At the $723 level on June 5, 2026, the QQQ $700-$650 vertical bear put spread for October 16, 2026, expiration, at $10.50, has a 1:3.76 risk-reward ratio.

💡 Today's Trade Idea: Bear Put Spread on QQQ.

💡 SMART TRADE IDEA

Bear Put Spread on IWM

Trade Setup: Buy $700 Put / Sell $650 Put, October 16, 2026, expiration.

Cost: $13.00 ($1,300 per spread)

Max Profit: $37.00 ($3,700 per spread)
Breakeven: $687 on QQQ on October 16, 2026
Risk-reward: 1:2.85

Management Plan: Take profits or roll down if QQQ falls to $650 or below before October 16, 2026.

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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.

Record Highs Meet Rising Political Risk

Markets reflect economic and political events. The United States remains the world’s leading economy. Elections have consequences, and the 2024 Presidential election led to significant policy shifts compared to the previous administration. Republicans won the White House and have had small majorities in the House of Representatives and the Senate, allowing the President a mostly clear path for his agenda. However, history shows that the majority typically lasts for two years, until midterm elections change the government’s political structure. A victory for the opposing party in November 2026 that creates a majority for the Democrats would likely thwart current agenda initiatives, create gridlock, and leave the current administration a lame duck for two years.

Markets are likely to react to the results of the midterm elections, and uncertainty leading up to the contests could increase volatility across stocks, bonds, and other asset classes.   

The odds favor a shift in the legislatures

The U.S. electorate remains divided in June 2026, with both the President and legislators receiving low approval ratings. According to major polling groups, President Trump’s approval rating is hovering between 34 and 40% in early June 2026. Meanwhile, the U.S. Congress has a lower approval rating at around 18%.

Republicans have slim majorities in the House of Representatives and Senate, and the current approval rating could mean a significant change is on the horizon after the November elections, as Democrats have a 44% favorable rating and a 52% unfavorable rating, compared to Republicans with a 38% favorable and 56% unfavorable rating. Polls are never perfect and can change with events between June and November 2026, but the current data suggests that the odds favor a shift toward a majority for Democrats in at least one legislative body.  

The bullish case for stocks and bonds- Gridlock is good

A shift toward a majority for Democrats in the House and/or the Senate would thwart many of the Trump administration’s current policy initiatives. History shows that gridlock, created by a division of power between the two political parties, is positive for the stock market because it fosters political stability and policy predictability, preventing major legislative changes that disrupt corporate profits. Gridlock preserves the status quo, which secures corporate planning. An October 2024 article from Riverwater Partners pointed out that “the S&P 500 has posted an average annual return of 12.5% when one party or the other controls both the House and Senate, compared to 17.2% with a split Congress.”

The bearish case for stocks and bonds- Political bifurcation

Markets reflect the economic and geopolitical landscapes, which remain highly turbulent in June 2026. The war between Russia and Ukraine continues to rage. The U.S. and Iran have not agreed to any deal to end the hostilities in the Middle East and reopen the Strait of Hormuz. China intends to reunify with Taiwan. Inflation and government debt levels are rising.

In the U.S., the country remains passionately politically divided. With the leading U.S. stock market indices at record highs, U.S. domestic and global uncertainty could derail the rallies and cause a substantial correction over the coming weeks and months. While there are plenty of geopolitical and economic factors that could trigger a correction, unexpected events tend to cause the most volatility and severe stock market reactions.

Now could be the perfect time to prepare and position

Stocks are at record highs, and U.S. government bonds are at the bottom end of their trading range, which is counterintuitive as stocks tend to fall when interest rates are elevated. Higher rates tend to attract capital from equities to fixed-income instruments.

The U.S. midterm elections will determine whether the current administration can continue its policy path or become a lame-duck administration until the 2028 Presidential election. With low approval ratings in the executive and legislative branches, the odds favor a political shift after the November elections, but do not guarantee it. Uncertainty can create the perfect environment for volatility.

A trade that could profit from volatility

Markets can turn volatile during the summer as liquidity decreases during vacation periods. A May 23, 2026, Morning Star article pointed out that “The ‘weak spot’ of the four-year presidential cycle tends to fall in the second and third quarters of midterm election years, or roughly from April through September.”

The tech-heavy NASDAQ Composite is typically the most volatile stock market index. If a substantial correction is on the horizon, the highly liquid QQQ ETF could experience the most significant percentage decline.

The last downdraft in markets occurred in April 2025 when the Trump administration rolled out its “Liberation Day” tariff policies. QQQ moved 25.6% lower from $540.81 in February 2025 to $402.39 per share in April 2025. During the same period, SPY fell 21.4% from $613.23 to $481.80 per share, and the DIA ETF declined 18.5% from $449.73 to $366.32 per share.

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