Good morning, traders…
Friday was the worst day for the stock market since April…
One Truth Social post from President Trump (since deleted) triggered the cascade lower:
“Starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying.”
The S&P 500 dropped 2.7%. The Nasdaq fell 3.6%. The Dow shed 878 points.
The crypto bloodbath was even more severe. Bitcoin plunged to $110,000, with many altcoins down 50-70% in less than an hour.
Trillions in market value, erased in a single session.
We’ve had 10 sell-offs since mid-July, but Friday felt different … like the market was just looking for a reason to crack.
And when it found one, it cracked hard.
Support levels that had been holding for weeks broke intraday. If you were sitting on heavy exposure without a hedge, you felt it.
The only thing that separated the traders who survived Friday from those who got destroyed was a plan for volatility before it hit.
I didn’t sell my core positions. I didn’t panic. I held what I had and even added to a few.
I could do this because I had already hedged my exposure before the sell-off started.
When you understand what drives these sharp moves — and how to protect yourself without panic-selling all of your positions — you can ride the volatility with ease (instead of getting shaken out at the worst possible time).
What Caused Friday’s Sell-Off? (It’s Not What You Think…)
Fear Plus Leverage
Two primary factors drove Friday’s move lower: fear and leverage.
Leveraged accounts were likely unwinding heading into the weekend. Brokers issue margin calls on Friday to mitigate weekend risk.
Add in hedge funds, structured products, and options positions getting closed, and you get the kind of cascade we saw.
But here’s what didn’t happen: panic.
Gold didn’t spike. Oil didn’t spike. Those are the signals of a credit event or systemic crisis. We didn’t see them.
The average true range (ATR) on the major indexes had been expanding all week. That’s always a clue that a big move is coming.
We just didn’t know which direction the indexes would move.
How I Hedge Without Panic Selling
When I have heavy exposure to the market, I don’t just hope volatility stays low.
I hedge.
One of the ways I do this is by buying SPY puts. I’m long beta in tech stocks, so I hedge by being short beta in the broader market with SPY puts.
That makes me “beta-neutral.”
Think of it like insurance on a house. You own the house. You’re not selling it just because there’s a storm coming. But you’ve got insurance in case something breaks.
If the market drops, the puts offset some of my losses. I don’t have to panic-sell my positions. I bend, but I don’t break.
This is how you protect exposure without trading out of everything.
You keep your core positions and hedge the risk.
Why I Use A “Top-Down Framework”
When volatility picks up, I rely on a top-down framework.
That means taking the 30,000-foot view of the most fundamental market forces.
Start with macro: rates, inflation, and central bank policy. Then move to sectors. Then industries. Then individual tickers.
It’s like looking at the weather. You start with the national map. Then your state. Then your town. Then your street.
The idea is to align your trade with what’s happening at broader levels instead of fighting them locally.
If the macro environment is shifting, if sectors are rotating, if industries are weakening — that context matters more than whether your individual ticker looks oversold.
Zoom out and trade the big picture.
The Only Way To Survive Big Sell-Offs
Friday’s drop was driven by fear and leverage, but it wasn’t a full-blown credit crisis or panic.
Gold didn’t spike. Oil didn’t spike. Those are the signals you see during systemic events, and we didn’t get them.
That means this could be a shakeout before another leg higher. Or it could be the start of deeper consolidation. I don’t know yet.
What I do know is that hedging gives me the flexibility to stay in my positions without sweating every 2% or 3% move lower.
Even with Monday’s bounce, we don’t know what will happen next.
If you’re sitting on heavy long/beta exposure right now, ask yourself: What will you do if another pullback happens?
Create a hedging plan before you need it.
By the time you feel the pain, it’s already too late.
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