Strategy Guide
SMH Put Sleeve Guide
Last updated: September 2026
Selling puts on the semiconductor ETF: why it is a separate strategy with its own budget, not a hedge for QQQ.
Why semiconductors
SMH holds the major chip names. The sector carries high implied volatility, so puts pay meaningful premium, and its long-run demand drivers (compute, automotive, industrial) are real.
High premium is not free money; it is the market pricing genuine drawdown risk in a cyclical, concentrated sector.
Why it is not a QQQ hedge
A hedge pays when the main book loses. A short put loses when the underlying falls, and semiconductors fall hardest exactly when QQQ falls. Correlation between the two snaps toward one in selloffs.
The sleeve is therefore run as its own strategy with its own entry conditions and its own capital budget, sized inside the combined tech exposure cap.
Standing rules
Puts are sold at rules-based strikes, only when the entry conditions agree, with cash reserved to take assignment if assigned. Assignment is a planned outcome, not an accident.
Losses are cut at defined levels. The sleeve stands down in regimes where the gate says premium does not compensate for the risk. Its results are tracked separately so it has to justify its own allocation.
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