Rising Risk of U.S. Government Shutdown: Using a Long Straddle on QQQ to Capture Short-Term Volatility

Trade Background:
U.S. government funding negotiations have hit another deadlock, with the probability of a shutdown on September 30 reaching 74%. Historically, similar government shutdowns have led to short-term increases in market volatility, but have had little long-term impact on fundamentals, typically considered "event-driven disruptions."

In past shutdowns in 2013 and 2018, U.S. stocks dropped briefly but quickly recovered.

For traders, these "window of volatility" periods can actually provide opportunities for short-term arbitrage.

Trading Strategy: Given the potential for volatility, I decided to enter a QQQ 600 Long Straddle position on September 29.

Rising Risk of U.S. Government Shutdown: Using a Long Straddle on QQQ to Capture Short-Term Volatility

Trade Logic: Rather than forecasting the direction of price movement, I bet that the market would experience significant short-term volatility due to the risk of a government shutdown.

Trade Outcome: Sure enough, QQQ showed quick volatility during the day. I chose to close the position early to lock in profits.

This trade was essentially a short-term volatility arbitrage. I didn't hold until expiration, but instead capitalized on intra-day price swings by buying low and selling high, minimizing the risk of time decay.

Review

✅ Success Points

– Chose the event window + at-the-money options + short expiration → High Gamma, fast volatility transmission.

⚠️ Risk Points

– If QQQ had stayed range-bound (between 598–602), both options would have quickly expired worthless.

Lessons Learned

1. Long straddle strategies are best used "before major news events."

2. The shorter the expiration, the quicker you need to enter and exit; don't hold too long.

3. Taking profits at a split leg is generally safer than holding until expiration.

Summary

The risk of a government shutdown could push market volatility higher in the short term, and the long straddle is a classic tool for volatility arbitrage. This QQQ long straddle strategy validated the approach: in an event window, rather than betting on direction, betting on volatility can still yield profits.

@Moomoo AU @Mooers Lab @Moo Options Explorer @Options Newsman

My September Options Playbook

This content is for educational and informational purposes only. It does not constitute financial advice or a recommendation to buy or sell any securities. I am not a licensed financial advisor. Investing involves risk, please conduct your own research.

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