Inspired by advances, investor excitement, and speculative trading, quantum computing stocks have lately exploded. Quantum Computing and Rigetti Computing turned out to be two of the biggest winners in 2024 as we close off another wild one for the stock market. QUBT and RGTI stock have skyrocketed 1,712% and 1,449% respectively. Alphabet's revelation of its "Willow" quantum chip—capable of tackling difficult problems in minutes—was a major impetus. Alphabet and other emerging businesses in the niche are positioned as leaders in this fast-evolving sector, which will continue attracting investor attention.

Government contracts add to the sector's legitimacy. Further proving the practical uses of quantum technology, Quantum Computing Inc. landed a NASA contract to utilize its quantum optimization machine for better imaging and data processing. Still, a lot of the thrill is hypothetical. Rushing to seize the potential of quantum computing, investors are driving volatility in stock prices.

What to Consider Now

It’s roskful to buy stock outright or shorting it at the current level with so much still unanswered about the future. But what investors might consider are options positions that could pay off handsomely if done correctly. None of the positions represents a recommendation. These are merely possible ways to play the situation depending on what outcome you may believe is most likely.

Below are some specific strategies, taking options related to Quantum Computing as an example:

1. Bull Call Spread

Objective: Profit from a continued rise in Quantum Computing's stock price while limiting risk.

How it works:

• Buy a call option at a lower strike price.

• Sell a call option at a higher strike price.

Example for QUBT:

$QUBT Vertical 250131 16.0C/18.0C$ 

• Buy a $16 call expiring in 1 month.

• Sell a $18 call expiring in the same month.

• Net cost (debit) limits risk while providing upside profit potential.

2. Covered Call

Objective: Generate income from owned shares while capping potential gains.

How it works:

Hold Quantum Computing shares.

Sell a call option at a strike price above the current share price.

Example for QUBT:

Sell a $20 call expiring in 1 month.

$QUBT 20250131 20.0 CALL$

Receive a premium; if shares rise above $20, they may be called away for a profit.

3. Long Call

Objective: Leverage upside potential with limited capital and risk.

How it works:

Buy a call option to gain upside exposure.

Example for QUBT:

Buy a $20 call expiring in 2 months.

$QUBT 20250221 20.0 CALL$

The premium paid is the maximum risk, while the upside is unlimited.

4. Protective Put

Objective: Hedge against potential downside after a rally.

How it works:

Buy a put option to protect the value of owned shares.

Example for QUBT:

Buy a $16 put expiring in 1 month.

$QUBT 20250131 16.0 PUT$

This limits downside risk while maintaining upside potential.

5. Straddle (for High Volatility Expectations)

Objective: Profit from significant price swings in either direction.

How it works:

Buy a call and a put at the same strike price and expiration date.

Example for QUBT:

Buy a $16 call and a $16 put expiring in 1 month.

$QUBT Straddle 250103 16.0C/16.0P$

This strategy benefits from large price movements, regardless of direction.

6. Short Put (for Bullish Income Strategy)

Objective: Collect premium with the intention to buy shares at a lower price.

How it works:

Sell a put option below the current share price.

Sell a $10 put expiring in 1 month.

$QUBT 20250131 10.0 PUT$

If shares stay above $10, keep the premium. If shares drop, be prepared to buy at $10.

These strategies cater to different risk profiles and market outlooks, whether anticipating further rallies, managing risks, or profiting from volatility in Quantum Computing shares.