The stock market rally can keep going despite Friday’s pullback. How to stay long while hedging slightly
The S & P 500 celebrated its 18 th new all-time for 2026 and its remarkable seventh record thus far in the month of May. This nearly 20% parabolic rally has pushed all three major U.S. stock indexes firmly into the green, with the S & P 500 and Nasdaq closing at fresh record levels. RSI (relative strength index) levels in State Street SPDR S & P 500 ETF Trust (SPY) have signaled overbought conditions in recent weeks and this morning’s profit taking makes sense. However, I believe the rally has more room to run and I want to produce some income with an attempt to capture this spike in volatility (VIX +6%) by using options. .SPX YTD mountain SPX year to date The S & P 500 has endured a tremendous snapback from the end of the March selloff (10% correction in March) to this week’s achievement of momentarily vaulting 7,500. FOMO and investors who flinched in March have been a significant input of this one-way and dominating trade for equity bulls. Emotions have been driving the market for sure, but earnings have been the undercurrent as investors witnessed a historic quarter of growth and corporate profitability, YoY growth of 27% for the S & P 500 in Q1. For context, the 10-year average for the S & P 500’s year-on-year growth sits at 8.6%. We are currently in a “Foundry Renaissance” where semis (led by my Essential 40 ETF (ESN) ‘s top holding of 2026, Intel ) are growing at 95% and the “Magnificent Seven” is expanding at 60%. The “Other 493” are showing signs of life too, growing at 19% as the markets seeks to broaden out. This is the fundamental floor that has supported the relentless new all-time highs in 2026. I want to sell a put spread to create an income stream for the next month, as option premiums have increased off this 1% pullback in the S & P 500. However, I want to define my risk and additional equity exposure up here as the market is still bothered by geopolitical tensions and stubbornly high U.S Treasury yields (10-year note rose to recent highs of 4.58%). The trade Sold the $720 6/18/2026 put for $7.75 Bought the $700 6/18/2026 put for $4.50 SPY was trading around $739.50 when executed. An investor will collect $3.25 or $325 per one put spread $16.75 is at risk which is the amount collected subtracted from the width of the strikes in this put spread. DISCLOSURES: Kilburg sold this spread, is long SPY. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
