by kmmeow1
I personally believe that buying put options on small cap ETFs such as IWM & IJR are going to be more profitable than on SPY & QQQ.
Why?
- Large companies have more ability to navigate the complex supply chain issue. Plus, giant firms like Apple and Amazon can afford to ask for favors and tariffs exemptions by kissing Trump’s ass and lobbying for favorable terms. Large cap companies also have ability to stockpile inventory and inputs, where as smaller businesses might not have the cash to do so. Larger firms with diversified supply chains or hedging strategies might absorb tariff costs longer, delaying bankruptcy risks to 1-3 years. Smaller, import-reliant businesses could collapse sooner, within 6-12 months.
- While tech giants have higher margins and have the ability to absorb some costs, smaller businesses with thin profit margins or limited cash reserves may face financial strain within weeks to months if tariffs significantly raise input costs. While large companies with a monopoly presence can pass costs onto consumers, smaller businesses without such advantage will be more vulnerable. For example, a 25% tariff on imported raw materials could erode profitability for manufacturers reliant on those inputs, especially if they can’t pass costs to consumers.
- Small cap companies tend to rely more on debt financing. Firms with high debt or limited access to credit may face bankruptcy faster—potentially in 6-18 months—if tariffs squeeze cash flow and they can’t service loans. Small businesses are particularly vulnerable.
The caveat is those small cap ETFs are less liquid and the options are thinly traded so you might have to be careful with the bid-ask spreads.
NOTE: This is not financial advice. Please conduct your own due diligence.