Momentum-driven stocks don’t climb forever. When narratives push prices far beyond their liquidity base, history shows they often retrace about 50% of the move once the cycle unwinds.
In this piece, I’ll walk you through examples like CRWV, CRCL, APLD, HIMS,—all of which experienced sharp parabolic moves followed by textbook retracements. The lesson? These setups don’t collapse in a single candle; they grind, consolidate, and bleed off premium as traders who loaded short-dated puts get washed out.
That’s why I’m avoiding front-month lottery tickets and instead focusing on out-of-the-money November bear put spreads. The benefits:
Reduced Vega risk: By selling a further OTM put, you protect against implied volatility crush.
Time cushion: November expiration gives the stock space to chop before the unwind really takes hold.
Controlled risk: Defined debit structures mean you’re not fighting unlimited upside in a crowded short squeeze.
My playbook is simple:
Buy a November put spread anchored around Fibonacci retracement levels.
Scale in across tiers (early entries will almost always feel “too early”).
Take partial profits on a double, then ride the rest for a potential flush into the retracement zone.
You can structure risk so you can survive the short squeezes, then get paid when the inevitable unwind kicks in.
