Market Storms: Navigating Geopolitics, Drawdowns, and Staying the Course
Current market update and what I'm doing here
Hey friends 👋
I wanted to take a brief detour from our Beginner Wheel Strategy Series this week because, honestly, what’s happening in the market right now is exactly the kind of moment that the series is trying to help prepare for.
The S&P 500 is down over 5% year-to-date as of early April 2026, mega-cap tech (the names we love to wheel) is taking it harder than most, and geopolitical headlines — tariffs, Middle East tensions, oil prices spiking — are creating the kind of noise that makes even seasoned traders second-guess themselves. The VIX has spiked to its highest level since last April’s tariff shock.
So instead of talking theory this week, let’s talk reality. Everyone is probably feeling what I’m feeling right now, so best time to discuss!
📰 What’s Actually Happening Out There
Let’s recap:
We’re in a midterm election year, and historically, the S&P 500 has experienced an average intra-year drawdown of about 18% during midterm years since 1957. That doesn’t mean it’s going to happen — but it means the conditions are ripe for volatility, and we shouldn’t be surprised by it.
On top of that, the macro picture is genuinely complicated right now:
The Iran conflict has become the most immediate source of market volatility
Oil prices have surged meaningfully
Mega-caps are underperforming
This is a compression environment. IV is elevated, premiums are juicy, but so is the risk of getting whipsawed or assigned at levels you didn’t expect.
🪞 An Honest Look in the Mirror
Something I’d like to admit and share, because I think transparency is one of the most valuable things I can offer, is that I’ve been caught breaking even my own rules that I have been preaching lately. I have been caught over-leveraging my portfolio, and in today’s conditions, it’s tough to manage.
I had too many positions open simultaneously — more than my own rules called for — and when the macro shock hit, I found myself fully deployed with limited dry powder to respond. No cash buffer. Several positions going against me at once. As someone who is using this account as income, it was hard to take distributions when there was nothing to distribute!
But was it a total catastrophe? No. The Wheel Strategy is designed to survive moments like this — assignment isn’t a loss, it’s just capital at work, albeit a little tied up. Sometimes, liquidity is more important than recovery, depending on your situation. But did it feel uncomfortable? Absolutely. And that discomfort was a direct result of decisions I made when things were going well. That’s the sneaky part about over-leverage — it feels fine right up until it doesn’t.
So I share this not to be overly dramatic, but because if I can help anyone else in a similar situation as myself, and I suspect some people are, I would just say that its totally ok. It’s not time to panic, but time to refine rules even further and reset.
🧠 The Psychology Trap: Why Drawdowns Feel Worse Than They Are
Here’s something I’ve had to remind myself of during this stretch:
The gains you’ve already harvested are real.
When you’re staring at positions that are underwater, it’s easy to forget that you’ve likely closed dozens of profitable trades this year. The premium income you collected in January, February, March? That’s in your account. It already happened. The pain of the current unrealized loss is disproportionately loud compared to the quiet satisfaction of those closed wins.
This is one of the most well-documented psychological patterns in trading: losses loom larger than equivalent gains. It’s called loss aversion, and it will make you do things you otherwise wouldn’t. Close too early, make panic trades, abandon your strategy. In the end, that’ll hurt you far more than the drawdown itself.
The Wheel isn’t broken. The market is just doing what markets do. What the Wheel does allows and buys you is time.
⚙️ What I’m Actually Doing (The Playbook)
So what am I doing now that we’re here? To re-iterate, these are my goals: your playbook might be different than mine. Income generation portfolio strategies differ greatly from long-term growth strategy portfolios. They share the same principles, but need to be handled differently. Remember what your main goal is and what works for you. But, for transparency, this is what I’m doing with my specific portfolio, step by step:
1. Restoring the cash buffer — first priority, full stop. My framework calls for 20-25% in liquidity at all times. I let that slip. I got confident and told myself I’m good! So before anything else, I’m evaluating each assigned position, identifying what my target is, and I’m closing one or two positions — even at reduced profit — to get that buffer back. Losses in single positions happen and you don’t need to have a 100% win rate to still be considered “winning.” Being liquid can be a win here, and I remind myself that liquidity is not idle money. It’s the ability to respond, your margin of safety, and your psychological insurance policy.
2. Cutting weak conviction positions. I have one position I’m in purely for the premium — high IV, high yield, but not a name I’d want to hold through a prolonged bear market. That’s the first to go. The rule is simple: only wheel names you’d be comfortable holding. If you wouldn’t want the shares, you shouldn’t be selling the put. Basic rules of wheel, and even I broke it! Cutting this even at a reduce profit to get back capital to get it back to work for me properly will return the loss profit far quicker than hoping for this one position to make it back for me.
3. No new positions until I’m back to full compliance. This is the discipline part. The premiums look amazing right now — elevated IV means elevated income potential. And that’s exactly the trap. More premium = more exposure. I’m not opening anything new until I’ve got my cash floor restored and my position count down to my max of 4, with cash buffer in place.
📋 How to Prepare BEFORE the Next Storm
If you’re reading this from a position of stability — great. Now is the time to pressure-test your framework so you’re not scrambling when volatility returns (because it always returns).
Ask yourself these questions:
Do I have a hard cash floor that I never touch? Not a target — a floor. A number that is off-limits regardless of how good the premiums look.
Am I wheeling names I genuinely believe in? If a stock went to zero tomorrow, would it hurt your portfolio or just your feelings?
Is any of my position sizing funded by margin? If yes, that margin becomes a structural risk in a downturn. Short-term settlement bridge? Fine. Structural component? No.
What is my maximum number of open positions? And are you actually honoring it, or just treating it as a suggestion when things are going well?
Do I have a checklist for drawdown environments? Knowing in advance what you’ll do when things go wrong removes the emotion from the decision.
The framework I use isn’t complicated. But it only works if I follow it — especially when the market is making it tempting not to.
🌅 The Bigger Picture: This Is Normal
Let me leave you with this.
We’ve been here before. The tariff shock of 2025 saw the S&P drop nearly 19% intra-year — and then it recovered and ended up 17.9% for the year. The fastest bear market in history, during COVID, was followed by one of the greatest recoveries. Every major drawdown in market history has been followed, eventually, by new highs.
That doesn’t mean every individual stock recovers. It doesn’t mean every trade works out. But it means that the strategy — selling premium on quality names, collecting income, staying disciplined — has the right to exist in every market environment, including this one.
The goal right now isn’t to maximize income, profits, or growth. The goal is to survive the drawdown with your capital intact so you can maximize income when conditions normalize.
Protect the base. Stay disciplined. Don’t let the noise make the decisions.
🔜 Coming Up Next
We’ll be returning to the Beginner Series next week, picking back up with Part 8 — Choosing Your Strike Price and Expiration: The Art of the Sweet Spot.
But this week, I hope this post was a reminder that even experienced options traders get caught off guard by the market. What matters isn’t whether you get hit — it’s how you respond.
Happy trading, stay safe out there, and as always — protect the base first. 🛡️
– HL Financial Strategies
This blog is for educational and entertainment purposes only. Nothing here constitutes financial advice. Always do your own research and consult a qualified financial professional before making investment decisions.