The sell-off has created a buying opportunity. How to trade while hedging risk using options

The current Iranian conflict is certainly creating anxiety and uncertainty, but the jump in volatility is also presenting a buying opportunity in U.S. equity markets. The S & P 500 recently established a new 2026 low this morning as WTI Crude Oil further surged and traded near $90 per barrel, about a 50% spike in recent weeks in crude oil. I want to use SPY options to try to capture what I believe to be a short-term bottom in stocks. Selling in S & P 500 futures accelerated after President Donald Trump said in a Truth Social post that the only path to end the U.S.-Iran war is with an “unconditional surrender” from the current Iran leadership. To amplify the downside pressure in equities, the jobs report experienced a significant, unexpected downturn in February 2026, with nonfarm payrolls falling by 92,000. President Trump has previously stated the plan for the Iran war initially “projected four to five weeks”, adding the U.S. military has the “capability to go far longer than that”. Markets want a shorter duration for the conflict. Selling programs have been relentless in the S & P 500, as many of these algorithmic systems look to push ranges (both lower and higher), flushing weak longs out of the market. Despite the VIX trading up 28.50, options markets are not panicking. The trade (risk reversal) Sold the SPY 3/20/2026 $670 put for $13.50 Bought the SPY 3/20/2026 $680 call for $11.15 This is a credit spread allowing an investor to collect $2.35 or $235 per one lot spread. SPY was chopping around $672 when executed. An investor must be prepared and willing to own SPY at $667.65 in the event SPY takes a further leg down. However, an investor will participate in an unlimited capacity if SPY vaults back above $677.65. I have cautious optimism that markets can snap back. DISCLOSURES: Kilburg owns this spread. 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.