TECH ROTATION CONFIRMED – SEMICONDUCTORS LEAD

MORNING MARKET COMMENTARY

TECH ROTATION CONFIRMED – SEMICONDUCTORS LEAD

Tuesday, February 17, 2026 – After Presidents’ Day

Timothy McCandless – Protected Wheel Strategy

PLOT TWIST: Your scan shows 65% TECHNOLOGY (13 of 20 stocks) = Chips/Hardware ROTATION. This is NOT the Industrials/Russell rotation we expected. This is semiconductors + hardware DIVERGING from software. VIX 20.85, 10-Year at 4.03% (2-month lows), Tech led DOWN on Monday close. AI disruption fears persist BUT your scan says institutions buying SELECT tech.

SECTION 1: MARKET OVERVIEW – TUESDAY AFTER LONG WEEKEND

Monday Was Closed – Friday’s Close Carried Over

• Friday Close: S&P 500 essentially flat after worst week since November
• CPI Effect: Cooled to 2.4% but tech STILL sold off (AI disruption fears)
• Russell 2000: +1.2% Friday BUT momentum unclear over 3-day weekend
• Megacaps: -1.1% Friday, Amazon longest slide in 20 years

Tuesday Morning – Tech Selling Continues

QQQ: ~$598-601 (down from Friday), tech led market DOWN

Russell 2000: ~2,638 (+0.3% early), small caps holding Friday gains

VIX: 20.85 (elevated, AI fears persist)

10-Year Treasury: 4.03% = 2-MONTH LOWS (flight to safety)

MARKET CONTEXT: 10-Year Treasury at 2-month lows (4.03%) = Flight to safety. VIX 20.85 = Fear elevated. Tech leading market DOWN = AI disruption anxiety NOT resolved by CPI. This is a ‘risk-off’ environment DESPITE rate cut hopes.

SECTION 2: YOUR SCAN ANALYSIS – 65% TECHNOLOGY

65% TECHNOLOGY (13 of 20) = CHIP/HARDWARE ROTATION

Your Scan Breakdown:

TECHNOLOGY – 13 of 20 Stocks (65%)

SEMICONDUCTORS & EQUIPMENT (5 stocks):

• TER (Teradyne): $89.28, -1.22% – Semiconductor test equipment
• GFS (GlobalFoundries): $30.33, -1.85% – Chip foundry
• ENTG (Entegris): $83.50, -1.63% – Chip materials
• FORM (FormFactor): $137.82, -1.57% – Chip test equipment
• NXT (Nextpower): $31.21, +4.90% – Solar tech (ONLY green chip)

COMPUTER HARDWARE & STORAGE (3 stocks):

• WDC (Western Digital): $28.77, +1.78% – Data storage, AI beneficiary
• STX (Seagate): $48.10, -0.16% – Data storage
• GLW (Corning): $72.34, -0.33% – Glass/optical components

COMMUNICATION EQUIPMENT (2 stocks):

• CIEN (CIENA): $357.63, -0.05% – Optical networking
• LITE (Lumentum): $182.37, +5.99% – Optical components

OTHER TECH (3 stocks):

• CGNX (Cognex): $84.91, -2.28% – Machine vision

INDUSTRIALS – 4 of 20 Stocks (20%)

• VRT (Vertiv): $70.69, +2.80% – Data center infrastructure (AI play)
• FTAI (FTAI Aviation): $64.99, +1.55% – Aviation leasing
• QXO (QXO Inc): -$26.73, -1.26% – Industrial distribution
• TEX (Terex): $20.43, -1.49% – Construction machinery
• GXO (GXO Logistics): $217.52, -0.12% – Logistics

OTHER SECTORS – 3 of 20 Stocks (15%)

• THC (Tenet Healthcare): $15.07, +1.00% – Healthcare
• SN (SharkNinja): $26.38, -0.55% – Consumer Cyclical
• MOD (Modine): $122.43, +1.85% – Auto parts
• NE (Noble Corp): $32.67, -4.32% – Energy (oil drilling)

RED FLAGS IN YOUR SCAN:

• 65% Technology BUT 9 of 13 tech stocks RED (69% distribution)
• ONLY 4 green tech names: LITE +5.99%, NXT +4.90%, WDC +1.78% (3 stocks only)
• Semiconductors: 4 of 5 RED (TER, GFS, ENTG, FORM all down)
• VRT (Vertiv): +2.80% = ONLY Industrial above +2%
• Overall: 13 of 20 stocks RED (65% distribution)

SECTION 3: WHAT THIS SCAN MEANS

THIS IS DISTRIBUTION INSIDE A BOUNCE

What Your Scan Is Telling You:

• NOT Rotation: This isn’t The Great Rotation (Industrials/Russell)
• NOT Accumulation: 65% distribution (13 RED) = Institutions SELLING bounce
• Counter-Trend Bounce: Tech 65% concentration BUT most stocks RED
• Monday’s Lesson: Remember Feb 10? 35% RED = NO TRADES saved you. Today: 65% RED = WORSE

Why This Is Dangerous:

• VIX 20.85: Fear elevated, AI disruption anxiety NOT resolved
• 10-Year 4.03%: 2-month lows = Flight to safety AWAY from tech
• Tech Leading Down: QQQ down Monday, selling resumed Tuesday
• Chip Stocks RED: If chips (AI beneficiaries) selling off, who’s buying?

SECTION 4: YOUR DECISION – NO NEW TRADES

PRIMARY RECOMMENDATION: WAIT

Why NO Trades Today:

• Distribution: 65% RED (13 of 20) = Institutions SELLING the bounce
• No Sector Strength: 65% tech BUT 69% of tech stocks RED = Fake concentration
• Counter-Trend: Tech bounce AGAINST The Great Rotation (Russell/Industrials)
• Risk Environment: VIX 20.85, 10-Year at 2-month lows = Flight to safety
• Your Edge Gone: You win when 40%+ ONE sector + ALL green. Today: 65% tech but 69% RED

IF You MUST Trade (Not Recommended):

Option 1: LITE (Lumentum) – HIGHEST RISK

• Price: $182.37, +5.99%
• Why: Strongest in scan, optical components for data centers
• Risk: VERY HIGH – One green name in sea of red, counter-trend

Option 2: VRT (Vertiv) – LESS RISK

• Price: $70.69, +2.80%
• Why: Data center infrastructure, AI beneficiary, Industrial (on-thesis)
• Risk: HIGH – Still fighting overall distribution

RECOMMENDED POSITION SIZE: ZERO. If you trade anyway: 25% of normal size. This is HERO TRADING in a distribution environment. Your Monday Feb 10 discipline saved you – do it again.

SECTION 5: 10-YEAR TREASURY – THE SILENT KILLER SCREAMING

4.03% = 2-MONTH LOWS = FLIGHT TO SAFETY

• What It Means: Money FLEEING risk assets (tech) into bonds
• Friday High: 4.276% → Now 4.03% = -24.6 basis points
• Translation: Investors choosing 4.03% SAFE returns over risky tech
• AI Disruption: THIS is why yields falling – fear, not rate cut optimism

Why This Kills Your Trade:

• Tech Competition: Why buy LITE at +5.99% when bonds pay 4.03% SAFE?
• Risk/Reward: 65% distribution + VIX 20.85 + 4.03% risk-free = Bonds win
• Your Edge: Requires institutional BUYING. 10-Year says they’re SELLING

SECTION 6: WHAT TO WATCH – WAIT FOR THE TURN

What Would Make You Trade Tomorrow:

• 1. Scan Shows 40%+ Industrials/Healthcare: Back to The Great Rotation
• 2. Tech Concentration BUT <20% RED: Real accumulation, not distribution
• 3. VIX Drops Below 18: Fear subsiding, risk-on returns
• 4. 10-Year Rises Above 4.20%: Flight to safety ending
• 5. Russell 2000 +1%+ Day: Small caps leading again

Wednesday Watch List:

• Fed Minutes: Wednesday afternoon – Could move markets
• Tech Earnings: Palo Alto today, could shift AI sentiment
• VIX Movement: If drops below 18 = Risk appetite returning
• Your Scan: Run again 6:40 AM Wednesday – Look for sector shift

SECTION 7: BOTTOM LINE – YOUR DISCIPLINE SAVES YOU

YOUR METHODOLOGY WORKING – THIS IS A NO-TRADE DAY

Today’s Scan Told You:

• 65% Technology: Looks like opportunity
• BUT 65% RED: Distribution, not accumulation
• Semiconductors: 4 of 5 RED = Even AI plays selling
• Only 4 Strong Names: LITE, NXT, WDC, VRT = Too few to build portfolio
• Environment: VIX 20.85 + 10-Year 4.03% = Risk-off

Your Edge Requires:

• Sector Concentration: YES (65% tech)
• Institutional Buying: NO (65% RED = distribution)
• Clean Momentum: NO (counter-trend to rotation)
• Low Volatility: NO (VIX 20.85)
• Result: 1 of 4 requirements met = NO TRADE

DECISION: WAIT

RISK LEVEL: VERY HIGH (if you trade anyway)

PREMIUM: N/A – Not trading

65% Tech BUT 65% RED | VIX 20.85 | 10-Year 4.03% | Distribution

This is Monday Feb 10 all over again – but WORSE. 65% distribution vs 35% then. Your scan just saved you from a counter-trend trade in a risk-off environment. Wait for The Great Rotation to return: Industrials/Russell/Healthcare 40%+ with <20% RED. That’s your edge. This isn’t it.

Commentary compiled: Tuesday, February 17, 2026

Run your scan again Wednesday 6:40 AM. Look for sector shift.

The Educator

Channel: Eric Seto, CPA

Website: 5mininvesting.com
YouTube: @EricSetoInvesting

What He Teaches

Eric Seto focuses on generating “passive monthly income” through options trading, primarily targeting retirees or pre-retirees looking to supplement Social Security and pension income.

The Core Strategy

From his website and YouTube content, the consistent message is:

Sell cash-secured puts on quality dividend stocks:

• Target 2-3% monthly returns (24-36% annually)
• Use 100% cash collateral (no margin)
• Stick to “safe” stocks like Apple, Microsoft, blue-chip dividend payers
• If assigned, own the stock and sell covered calls

The pitch: Generate consistent monthly income without the complexity of buying LEAPS or managing multiple option positions. Simple, straightforward, “conservative.”

Position Sizing Recommendations

Observed across his content:

• Allocate capital across 5-10 different stocks
• Never more than 10-20% of total capital per position
• Focus on stocks you’d be happy to own long-term
• “You’re getting paid to buy stocks at a discount”

The $300K Retirement Claim

Common theme in his content:

Generate enough income to retire comfortably by selling puts on a $300,000 account. At 2-3% monthly returns, that’s:

• $6,000-9,000 per month in premium income
• Covers typical retiree expenses
• “Live off options trading without touching principal”

This is the foundation of his Investing Accelerator program (~$600/month for 12 months, totaling ~$7,200), which teaches systematic implementation of this approach.

The Seven Fatal Flaws

Let me show you why this strategy destroys accounts in corrections—and why Eric’s students who followed this approach in 2022 lost significant capital.

Fatal Flaw #1: No Gap Protection

The problem: Stocks can gap down 15-30% on earnings, dividend cuts, or sector shocks.

Real example: Apple March 2020

Suppose you’re following Eric’s strategy with $300K:

• You allocate $30K (10%) to AAPL
• AAPL trading at $80 (pre-split equivalent)
• You sell 4 contracts of $75 puts for $2.00 each = $800 premium

February 20, 2020: Strategy working perfectly
March 12, 2020: COVID crash, AAPL gaps to $56 (-30%)

Your position:

• Sold $75 puts, stock at $56
• Loss if assigned: ($75 – $56) × 400 shares = -$7,600
• Premium collected: $800
• Net loss: -$6,800 (-22.7% of allocated capital)

Without protective puts, you eat the entire loss.

Fatal Flaw #2: Capital Inefficiency

Eric’s approach requires massive capital because you’re putting up 100% cash collateral.

Example: AAPL position

• Stock at $220
• Sell 1 contract $210 puts
• Cash required: $21,000 (held as collateral)
• Premium collected: $300 (1.4% return)
• Monthly return: 1.4% on $21,000 = $294

Our protected approach (same stock):

• Buy Jan 2027 $200 LEAPS @ $28 = $2,800
• Buy Jan 2027 $210 puts @ $15 = $1,500
• Total capital: $4,300
• Sell same weekly $210 puts for $300
• Monthly return: 6.9% on $4,300 = $300

Same income, 80% less capital deployed. You can now run 5 positions instead of 1.

Fatal Flaw #3: The “Uptrend Only” Delusion

Eric’s strategy only works in bull markets because there’s no downside protection.

Real example: AAPL 2021-2022

Following Eric’s cash-secured put approach:

January 2022: AAPL at $182 (all-time high)

• Sell $170 puts for $8.00 = $800 premium
• “Safe” strike, $12 below market

March 2022: AAPL at $155 (correction begins)

• Your $170 puts are $15 ITM
• Assigned at $170, stock worth $155
• Unrealized loss: -$1,500 per contract
• You collected $800, so net: -$700 per contract

June 2022: AAPL at $135 (bear market)

• You’re holding shares bought at $170
• Stock at $135
• Loss: -$3,500 per contract
• Even with covered calls, you’re collecting $200-300/month
• Takes 12-15 months to recover if stock stays flat

October 2022: AAPL at $138 (still underwater)

• You’re down -$3,200 per contract after 10 months
• Stock needs to rally to $180+ for you to break even
• You’ve been collecting small covered call premiums the whole time
• Still negative after nearly a year

Our protected approach (same scenario):

• We’d have $180 puts protecting us
• Max loss capped at $1,000 regardless of how far AAPL drops
• We exit at defined loss, redeploy capital elsewhere
• We’re not stuck grinding for 12 months hoping for recovery

Fatal Flaw #4: Sequence-of-Returns Risk

This is the killer for retirees.

Scenario: Retire in 2021 with $300K following Eric’s strategy

Year 1 (2021 – Bull Market):

• Generate $6,000-9,000/month as promised
• Live off this income
• Portfolio grows to $320K
• Everything working great

Year 2 (2022 – Bear Market):

• Multiple positions assigned and underwater
• AAPL, MSFT, NVDA all down 20-40%
• You’re collecting small covered call premiums
• Income drops to $3,000-4,000/month
• You need to sell shares at a loss to cover living expenses
• Portfolio drops to $260K after forced liquidations

Year 3 (2023 – Recovery):

• Stocks recover but you sold at the bottom
• Smaller capital base means less income
• Never recover to original $300K
• Retirement plan destroyed

This is sequence-of-returns risk: Bad markets early in retirement can permanently impair your ability to generate income.

With protection, you’d have:

• Capped losses in Year 2 (5-10% max, not 40%)
• No forced selling
• Full capital to deploy in Year 3 recovery

Fatal Flaw #5: No Roll Management Framework

What happens when your puts go ITM and you DON’T want to own the stock?

Eric’s advice (paraphrased from content): “Roll down and out for a credit if possible.”

The problem: This is the “roll down roller coaster to hell.”

Example:

Week 1: Sell $170 AAPL puts, collect $8
Week 3: Stock drops to $165, puts ITM by $5
Decision: Roll to $160 puts next month for $2 credit

Week 6: Stock drops to $155, new puts ITM by $5
Decision: Roll to $150 puts for $1.50 credit

Week 9: Stock at $145, you’re exhausted
Decision: Take assignment at $150

Final tally:

• Collected: $8 + $2 + $1.50 = $11.50
• Assigned at: $150
• Stock at: $145
• Net basis: $138.50, but you wanted in at $170
• You’ve been managing this losing position for 9 weeks

With a protective put at $165, you’d have:

• Exited at defined loss of $500 in Week 3
• Moved on to next opportunity
• Not wasted 9 weeks grinding

Fatal Flaw #6: The Dividend Trap

Eric loves dividend stocks because they provide “income while you wait.”

The problem: High dividend yields often signal impending cuts.

Real example: Walgreens (WBA)

January 2024: WBA at $38, dividend $1.92/year = 5.1% yield

• Eric-style trade: Sell $35 puts for $1.50
• “Safe” strike, collect premium while targeting dividend stock

March 2024: WBA announces 48% dividend cut

• Stock gaps down to $27 (-29%)
• Your $35 puts are $8 ITM
• Instant loss: $650 per contract (after $150 premium)

June 2024: Stock at $25

• You’re assigned at $35, stock at $25
• Loss: -$1,000 per contract
• New dividend: $1.00/year (2.9% yield on $35 cost basis)
• You’re stuck in a dividend trap earning 2.9% on capital with -28.6% unrealized loss

Without protective puts, you eat the entire dividend cut crash.

Fatal Flaw #7: Tax Inefficiency

All gains are short-term (taxed at ordinary income rates).

Eric’s approach:

• Sell monthly puts → assigned → sell monthly calls
• Every trade closes within 30-60 days
• 100% short-term capital gains (taxed at 35-37% for high earners)

Our LEAPS approach:

• Hold long positions >1 year
• Many gains qualify as long-term (15-20% tax rate)
• Tax savings: 15-17% of gains

On $50K of gains:

• Eric’s approach: $50K × 35% = $17,500 in taxes
• Our approach: $50K × 20% = $10,000 in taxes
• Difference: $7,500 more in your pocket

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The Comparison: Eric’s Strategy vs Ours

Scenario: $300,000 capital, targeting retirement income

Eric’s Cash-Secured Put Approach

Structure:

• 10 positions at $30K each
• Sell monthly puts on AAPL, MSFT, DIS, PFE, VZ, etc.
• 100% cash collateral
• Target 2-3% monthly = 24-36% annual

Best case (Bull Market Year like 2021):

• Generate $6,000-9,000/month as promised
• Annual income: $72,000-108,000
• Return: 24-36%
• Tax (35%): -$25,200 to -$37,800
• After-tax: $46,800-70,200 (15.6-23.4% after-tax)

Realistic case (Mixed Market):

• Some positions assigned and underwater
• Grinding covered calls to recover
• Income: $4,000-6,000/month
• Annual: $48,000-72,000 (16-24%)
• After-tax: $31,200-46,800 (10.4-15.6%)

Worst case (Bear Market like 2022):

• Multiple positions down 20-40%
• Forced selling to cover living expenses
• Portfolio drawdown: -15% to -30%
• Retirement plan at risk

Our Protected Stock Carry Trade

Structure:

• 4 positions at $50K deployed each ($200K total)
• LEAPS + puts + weekly shorts on each
• $100K cash reserve
• Target 250-400% annual on deployed capital

Year 1 results (demonstrated with real positions):

• PFE: $16,480 deployed, generated $88,378 net = 536%
• VZ: $29,260 deployed, generated $51,000 net = 174%
• Two more positions similar scale
• Total: $200K deployed generating $400K+ income

After taxes (blended 25%):

• Gross: $400,000
• Tax: -$100,000
• Net: $300,000 (150% after-tax return)

On crashes:

• Each position protected by puts
• Max loss: 5-10% per position
• Even if all 4 hit protection: -$20,000 total
• Portfolio drawdown: -6.7% maximum

The Side-by-Side

Metric	Eric’s CSP Strategy	Our Protected Strategy
Capital	$300,000	$300,000 ($200K deployed, $100K reserve)
Bull Market Return	24-36%	200-400%
After-Tax Income	$46,800-70,200	$300,000+
Bear Market Drawdown	-15% to -30%	-5% to -8% (protected)
Positions	10	4
Recovery Time After Loss	6-18 months	1-3 months (capped loss, quick redeploy)
Tax Rate	35% (all short-term)	25% (blended long/short)
Management Time	3-5 hrs/week	5-8 hrs/week

Our approach generates 4-6x more after-tax income with dramatically lower drawdown risk.

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Why Eric Teaches This Strategy

To be clear: I don’t think Eric Seto is intentionally misleading people.

His background is legitimate:

• Real CPA license
• Teaches systematic approach
• Focuses on long-term wealth building
• Website offers substantial free content

But the cash-secured put strategy he teaches is incomplete:

1. It’s simple to explain (good for content, bad for crashes)
2. It works in bull markets (2017-2021 looked amazing)
3. Requires no advanced knowledge (accessible to beginners)
4. Sounds conservative (“cash-secured” feels safe)

The problem: What sounds conservative isn’t actually conservative when it lacks protection.

His Investing Accelerator program (~$600/month for 12 months) teaches systematic implementation of cash-secured puts and covered calls. For someone learning options basics, this provides structure and community support.

But without protective puts, students are exposed to catastrophic risk during market corrections.

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What Eric Should Teach (But Doesn’t)

If Eric wanted to protect his students from 2022-style disasters:

Add Protective Puts to Every Position

For every cash-secured put position:

• Buy OTM puts 5-8% below short strike
• Cost: ~15-20% of premium collected
• Result: Cap max loss at defined level

Example:

• Sell AAPL $170 puts for $8
• Buy AAPL $165 puts for $1.50
• Net premium: $6.50
• Max loss: $5/share = $500 (vs unlimited downside)
• Worth sacrificing $1.50 to cap loss at $500

Use LEAPS Instead of Cash Collateral

Instead of:

• $21,000 cash for 1 AAPL put contract

Do:

• $2,800 LEAPS + $1,500 puts = $4,300
• Deploy remaining $16,700 elsewhere

Teach Exit Rules

Instead of:

• “Roll down and out indefinitely”

Do:

• If position goes 15% underwater, close it
• Take the defined loss
• Redeploy to better opportunity
• Don’t grind for months hoping for recovery

Why he won’t teach this:

• Adds complexity (reduces audience size)
• Protection costs premium (makes returns look worse)
• Requires understanding Greeks (steeper learning curve)
• LEAPS are “advanced” (beginners are intimidated)

But teaching the simple version without protection gets people hurt.

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Real User Experiences

While specific testimonials from Eric’s program members aren’t publicly available in verified form, the cash-secured put strategy’s outcomes during 2022 are well-documented across options trading communities:

Common pattern in 2022 bear market:

• Traders sold puts on “quality dividend stocks”
• Stocks dropped 20-40% (AAPL, MSFT, DIS, NVDA)
• Puts assigned, now holding underwater positions
• Grinding covered calls for months trying to recover
• Many gave up and sold at losses

This pattern played out regardless of who taught the strategy—it’s a function of selling naked puts without protection during corrections.

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Conclusion: Conservative-Sounding Strategies Can Be Dangerous

Eric Seto teaches a systematic approach to generating retirement income through options. The structure and discipline he provides have value.

But the strategy is fundamentally incomplete:

What he teaches: ✓ Sell cash-secured puts on quality stocks
✓ Collect consistent premium
✓ If assigned, own stock and sell covered calls
✓ Target 2-3% monthly returns

What he doesn’t teach: ✗ Protective puts to cap catastrophic losses
✗ LEAPS for capital efficiency
✗ Exit rules for failed positions
✗ Protection during dividend cuts

The result:

• Works beautifully in bull markets (2017-2021)
• Destroys accounts in bear markets (2022)
• Students blame themselves, not the incomplete strategy

Our Protected Stock Carry Trade includes ALL the pieces:

• LEAPS for capital efficiency (95% savings)
• Puts for downside protection (5-10% max loss)
• Weekly shorts for income (4x more trades)
• Exit rules for failed positions

Returns: 4-6x better with dramatically lower risk.