Greedy Man With Blue Skull - stock illustration

(Getty Images)

Hedging the AI trade and crypto with futures

As anxiety over the AI trade increases and volatility in crypto spikes, traders who are worried about downswings can manage risk with futures.

Tasha Matsumoto

2/13/26 4:51PM

Welcome to Sherwood’s deep dive into futures markets, presented in partnership with

As anxiety over the AI trade increases and volatility in crypto spikes, traders who have a long-term bullish outlook on their holdings but have near-term concerns about downswings can use futures to manage risk.

Just as the origins of the futures market can be traced back to farmers who needed to hedge their crops, hedging is still an important function of the futures market for all types of participants, from airlines hedging the price of oil to retail investors looking to hedge their retirement portfolio.

Why hedge?

Hedging with futures allows traders to manage portfolio risk in the event of a downturn. As their holdings lose value, a short futures contract would gain in value, offsetting some of their losses. Because of the leverage futures offer, a relatively small initial margin requirement can hedge a large portfolio.

Long-term investors looking to protect their retirement portfolio holistically could use S&P 500 Index futures to hedge against downside risk. If, however, you’re specifically concerned about AI risk or a downturn in the Magnificent 7, given that roughly 70% of the Nasdaq 100 consists of either a Mag 7 or tech stock, selling Nasdaq 100 futures contracts could offer a broad hedge against a potential AI downswing.

Depending on the size of the position you want to hedge, a variety of contract sizes are available.

For example, if you want hedge a $50,000 position in Nasdaq 100 companies, a Micro E-mini Nasdaq 100 futures contract (/MNQ) has a $2 multiplier, meaning that if the Nasdaq 100 is trading at 25,000, the notional value of one /MNQ contract is $50,000 ($2 x 25,000).

Let’s say that the Nasdaq 100 drops 5%. Your long position is now worth $47,500. However, if you sold one /MNQ contract, the value of your short futures position would theoretically rise by the same amount, in which case you could buy back your short futures contract for a $2,500 profit.

For traders with a large concentration of crypto, cryptocurrency futures are also available for a wide variety of coins, including bitcoin, ethereum, XRP, and solana.

This summer, CME Group plans to launch Single Stock futures on more than 50 of the top US stocks, which will allow traders to further tailor their hedge for a large exposure in Nvidia, Alphabet, Meta, and more.

Risks of hedging

While hedging offers downside protection, there’s always a risk that your position will move to the upside, in which case, the loss on your short position will eat into the gains on your long position. For this reason, traders might choose to hedge only a portion of their portfolio.

Ultimately, hedging functions a lot like insurance: while you hope you never have to use it, during an unfortunate event, you’re very glad to have it.

Max Knoblauch37m

Nike’s China business declines for seventh straight quarter

Sportswear kingpin Nike reported results for its third quarter, which ended in February, after the bell Tuesday. The stock fell about 3% in after-hours trading.

For fiscal Q3, Nike reported:

Earnings of $0.35 per share, comfortably above the Wall Street consensus of $0.29 per share compiled by FactSet.
$11.28 billion in total revenue, roughly in line with the $11.26 billion estimate.

Nike’s sales in China — where the company earns about 15% of its revenue — fell 7% to $1.62 billion. That’s its seventh straight quarter of sales declines in the market, though this quarter’s was less than feared. The company had issued weak guidance for this quarter considering continued softness in the region.

“This quarter we took meaningful actions to improve the health and quality of our business,” said Nike CEO Elliott Hill. “The pace of progress is different across the portfolio and the areas we prioritized first continue to drive momentum.”

Nike shares are trading near decade lows this month, as tariffs continue to weigh on profits and shipping costs rise amid the war with Iran. As of Tuesday’s close, the stock was down 17% year to date.

Luke Kawa, Tasha Matsumoto

Stocks end worst quarter since 2022 with best day since May

Optimism that the end of the war may be near sent stocks surging.

Max Knoblauch3h

Oil-sensitive travel stocks pop following Iran state media reporting on potential war resolution

Travel stocks are surging on Tuesday as oil prices fall following reports from Iranian state media that President Masoud Pezeshkian said the country has “the necessary will to end this war,” but would only do so with guarantees that “prevent the recurrence of aggression.”

The war has sent oil prices and refining margins surging this month, causing airlines and cruise lines to cut profit forecasts despite reported high demand.

Following Tuesday’s update, shares of the big four US airlines (Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines) all climbed, along with smaller rivals including JetBlue. US airlines have stopped fuel hedging in recent years, increasing their exposure to upward swings in oil prices.

Cruise stocks also rallied, with Carnival and Norwegian up more than 6% and Royal Caribbean up about 5%.

J. Edward Moreno6h

The FDA is expected to lift restrictions on certain peptides, the NYT reports

The Food and Drug Administration is expected to lift restrictions on certain peptides, allowing the experimental, often injectable substances to be sold by compounding pharmacies, The New York Times reported Tuesday.

The potential move was previously reported by The Wall Street Journal, and teased by Health Secretary Robert F. Kennedy Jr. on the “Joe Rogan Experience” podcast in late February.

Peptides have boomed in popularity recently, with search interest for “peptides” surpassing “ozempic” this month. Many of them are currently understudied and not approved for human use, a rule consumers are able to bypass by purchasing them from suppliers that sell them for, ostensibly, research purposes only.

As reports of the FDA changing its stance of peptides mount, consumer health companies like Hims & Hers and Superpower have been getting ready to roll out their peptide offerings as soon as they get the FDA's blessing.

The peptide gold rush: How impending deregulation could supercharge a shadow industry

Matt Phillips6h

Memory stocks bounce as Bernstein analyst calls TurboQuant fears “overdone”

Memory stocks rose Tuesday, after Bernstein analysts called the recent panic over Google’s TurboQuant AI algorithm “overdone.”

Bernstein analyst Mark Newman wrote:

“[Hard disk drive] and Memory stocks have sold off significantly due in part to fears from Google’s TurboQuant report. This however, should have zero impact on HDD demand and negligible impact on NAND demand. Given the stock sell-off we see this as an attractive entry point for Seagate Technology Holdings, Western Digital and Sandisk’s and upgrade WDC to Outperform.”

All three stocks were up early Tuesday, as was memory chip maker Micron.

Today’s rally stands in stark contrast to the pummeling these shares have endured over the last week, after Google Research published a technical paper on March 24 detailing its TurboQuant AI algorithm, which compresses the amount of data associated with AI operations without affecting the accuracy of AI models.

That was seen as a threat to surging AI demand for memory storage, which has supercharged prices for memory chips and memory-related stocks over the last year.

Hedging the AI trade and crypto with futures

Fresh takes on financial news

Subscribe and thrive