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If you caught my six-part series on quantum computing, you know my favorite long-term pure-play is IonQ (IONQ) and my favorite less risky “picks-and shovels” play is Keysight Technologies (KEYS).
You also know a popular quantum stock I’m avoiding today is Quantum Computing (QUBT).
(Here are links to my quantum series if you’re interested: Part I, Part II, Part III, Part IV, Part V, Part VI).
Today, I want to walk you through another way to play quantum… a way that allows you to manage the space’s inherent volatility and still make money from your convictions. It’s a simple strategy I’ve used when it makes sense during my 25 years as an analyst and investor. And it makes sense for quantum computing investing today.
It’s called a “pairs trade.”
Here’s the basic idea: You buy one stock you think will do well, and you simultaneously short another stock in the same space you think will do poorly—so broader market moves affect them roughly equally.
A simple analogy: Think about two American bistros located in the same town on the same street. A James Beard Award-winning chef and a world-class general manager with decades of experience run Bistro A. It has amazing food and a packed dining room every night. Bistro B is run by a “chef”-owner lacking culinary talent and good business sense. He can barely keep the lights on and just rebranded for the third time in five years.
If you could bet that Bistro A would outperform Bistro B—regardless of whether the broader restaurant industry or American bistro niche has a good year or a bad year—wouldn’t that seem like a smart bet?
That’s essentially a pairs trade. It lets you manage broader market volatility and still make money from your convictions.
Let me explain.
As I mentioned earlier—and you can read about in Part V of my quantum series—I’m a big fan of IonQ (IONQ) as a long-term quantum computing pure-play investment. I’ve said it’s positioned to basically become “The Nvidia”… “The Cisco”… and “The TSMC” of quantum.
For the purposes of this exercise, let’s say you’re a long-term IONQ bull too. But you’re hesitant to invest in it because quantum computing stocks are wildly volatile.
Just in the past year, for example, IonQ’s stock has ranged from a low $17.88 per share to a high of $84.64 per share. That’s a spread of almost 5X from low to high—in a single year. If you happened to buy near the 52-week high in October 2025, you’d currently be down about 60%. Such a situation might make you panic-sell, even if you think the long-term thesis remains intact.
Meanwhile, let’s say there are quantum stocks out there that you think are crazy overvalued—stocks with multibillion-dollar market caps but no real business and virtually no revenue. And Quantum Computing (QUBT)—which you can read about in Part VI of my quantum series—is one such stock.
Despite the company generating only about half a million dollars in revenue over the past year—with no expected near term revenue ramp—and the stock selling off hard since its October 2025 highs, QUBT still boasts a market cap of about $2 billion.
Shorting QUBT might seem like a no-brainer slam dunk, but meme-stock-style rallies can send even the weakest names soaring in no time on nothing but hype. If you’re short when something like that happens, you risk catastrophic losses.
A solution: pair IONQ and QUBT together.
By going long IONQ and short QUBT at the same time, you neutralize much of the broader quantum volatility. If quantum computing falls out of favor and all quantum stocks tank, the loss you’d take on your IONQ long position effectively gets canceled out by gains on your QUBT short position.
But if quantum computing as a theme gets hot and all quantum stocks spike, much of the loss you’d take on your QUBT short would get canceled out by your IONQ long.
So essentially what you’re left with is a pure bet on the relative performance of IONQ versus QUBT. You’re betting that the strong company will outperform the weak one over time. And that is something you can have much higher conviction in than guessing where the whole quantum space is headed next week, month, or year.
We’ll walk through the mechanics and possible outcomes of such a trade in just a bit, but first I want to talk about when a pairs trade make sense.
First, when you have a high-conviction view on two companies in the same space, but opposite views each. That’s exactly what we have here. You think IONQ is the best quantum pure-play and QUBT is one of the weakest. The contrast is stark.
Second, when the space itself is hyper-volatile. Quantum computing stocks routinely swing more than 10% in a single session. That kind of volatility can shake even the most disciplined investor out of a position. A pairs trade dampens that noise.
Third, when you don’t want to make a macro bet. Maybe you’re uncomfortable making a bet about whether the market will rise or fall this year. Maybe you’re worried about interest rates, tariffs, or a recession. With a pairs trade, you don’t need to have an opinion on any of that. You just need to be right about one company versus another.
Here’s how you’d execute this trade.
Step 1: Open a margin account with your broker if you don’t have one. You can’t short stocks in a regular brokerage account because it involves borrowing shares from the broker (or another party) to sell on the open market, with the obligation to buy them back later. This creates a form of leverage that requires a margin account under US securities regulations (and similar regulations elsewhere). Most major brokerages (Schwab, Interactive Brokers, Fidelity) offer margin accounts. You typically need a minimum of $2,000 in the account to get started. And the broker may impose additional requirements based on your trading experience.
Step 2: Decide how much capital to allocate. Let’s say you want to put $10,000 into this trade. You’d put $5,000 into the long side and $5,000 into the short side. This equal dollar allocation means your net exposure to the overall market (and to the quantum space specifically) is reduced as much as possible.
Step 3. Buy IonQ (IONQ). With $5,000 at about $31 per share (as I write), you’d buy about 161 shares. This is your long position. You profit if the stock goes up.
Step 4. Short Quantum Computing (QUBT). With $5,000 at about $8 per share, you’d short about 625 shares. When you short a stock, you’re borrowing shares, selling them at today’s price, and hoping to buy them back later at a lower price. If the stock falls, you profit. If it rises, you lose.
Before moving on to what happens next, I want to note two important things:
1. Sometimes it makes sense to periodically rebalance pairs trades depending on who you are and your specific investing strategy. Sometimes it doesn’t. I’m not going to get into the rebalancing discussion here because it can get highly technical, it’s subjective, and it should be considered on a case-by-case basis.
2. Shorting includes a borrowing cost in addition to any commissions, margin interest (if applicable), and potential dividend payments you may owe to the share lender. As I write, the annual borrow rate (also known as the short borrow fee or cost to borrow) for QUBT ranges from about 0.7% to 1.5% depending on the broker. That’s not bad. On a $5,000 short position, you’d pay between $35 and $75 per year in borrowing costs—a negligible drag on the trade. But the rate can change while your position is open and the fee adjusts accordingly. So this is something to keep in mind.
Once you execute a pairs trade there are four scenarios that could play out.
Scenario 1: IONQ rises and QUBT falls. This is the ideal scenario. Your long makes money and your short makes money. If IONQ gains 40% and QUBT falls 40%, your $5,000 long position gains $2,000 and your $5,000 short position gains $2,000. Your profit: $4,000 on a $10,000 trade—a 40% return.
Scenario 2: Both stocks go up. This is where the pairs trade shows its value. Say quantum computing gets hot and both stocks rally. If IONQ rises 30% and QUBT rises 20%, your long gains $1,500 and your short loses $1,000. Your profit: $500. You still made money because your strong horse ran faster than your weak horse.
That said, if QUBT rallies more than IONQ—say on a meme-stock-style short squeeze—you could lose money even though your long position went up. I’ll talk more about this risk and others, and how to manage them in just a bit.
Scenario 3: Both stocks go down. Same logic, just in reverse. Say quantum computing falls out of favor and both stocks fall. If IONQ falls 15% and QUBT falls 25%, your long loses $750 but your short gains $1,250. Your profit: $500. Again, you made money—this time because your weak horse fell faster than your strong horse. Your thesis about the relative quality of the two companies was right, and the trade paid off even in a declining market.
Scenario 4: QUBT rises and IONQ falls. This is the worst-case scenario. Your long loses money and your short loses money. If QUBT gains 20% and IONQ falls 20%, you lose $1,000 on each side. Total loss: $2,000, or 20% of your capital.
This could happen because maybe QUBT announces a surprise contract or partnership that excites investors, while IONQ reports disappointing quarterly results or faces some sort of negative headline that spooks investors right around the same time. It may be unlikely both things happen at once, but unlikely things happen all the time in the stock market.
Now, let’s talk more about risk and how to manage it.
Every time you put money to work in the markets, there’s risk involved. Pairs trades are no exception. Here are three things to keep in mind:
1. Short squeeze risk. Shorting any stock carries the theoretical risk of unlimited losses, because there’s no ceiling on how high a stock price can go. QUBT is a popular retail stock with a devoted following. If a short squeeze materializes, QUBT could spike dramatically in no time. Even though IONQ would likely benefit from a broader quantum rally, the magnitude of a squeeze in QUBT could overwhelm your long position.
2. Margin call risk. Since shorting requires a margin account, your broker can issue a margin call if the value of your account drops below a certain threshold. This could force you to close positions at unfavorable prices. So it’s important to have adequate capital in your account well beyond what’s allocated to this trade.
3. “Right thesis, wrong timing” risk. You may be 100% correct that IONQ is a superior company to QUBT. But if it takes three years for other investors to recognize that, you’ll be paying borrow costs on the short the whole time, and you’ll need the emotional stamina to sit through potentially painful interim moves.
One more thing to keep in mind about QUBT specifically: The company recently raised about $1.25 billion and now sits on over $1.5 billion in cash. That war chest matters for a trade like this because it gives QUBT the ammunition to generate headlines that could spike the stock. It’s already announced the $110 million acquisition of Luminar Semiconductor to advance its tech roadmap.
Similar acquisitions and headline-grabbing press releases could trigger painful rallies in the near term. This actually improves the case for a pairs trade rather than simply shorting QUBT outright. Shorting a cash-rich headline-generating meme stock is a recipe for sleepless nights. But paired with a long position in IONQ, you could weather those spikes more easily—because a rising quantum tide would likely lift your IONQ position too.
A simple strategy to help manage these risks is to set a stop-loss on the trade as a whole. I wouldn’t enter the stop-loss orders into the market—they can get triggered by noise at times when it’s smarter to keep holding and it’s possible for market makers and algorithms to take advantage of the information for their benefit and to your detriment.
Instead, you could just set a “mental” stop-loss. So if the combined position loses 20-25% of its initial value, you might close both sides and reassess. Such a strategy can prevent a bad trade from becoming a catastrophic one.
Another way to manage risk would be to buy put options on QUBT instead of shorting the stock. I’ll save the mechanics of options for another time because this piece is already rather long. But the gist is that you’d make money if QUBT fell below a specific price before a specific date. And while you’d pay a premium upfront for these options, that premium is the most you can lose on the short side of your trade.
However you decide to manage risk, the bottom line here is that by pairing these two stocks together—long IONQ and short QUBT—you create a trade that profits from the quality differential between the two companies while hedging out the gut-wrenching volatility of the quantum computing space.
You’re not betting on whether quantum will be hot next month. You’re not betting on whether the stock market will go up or down. You’re betting on something much simpler: that the company you’re convinced is better will eventually outperform the company you’re convinced is worse.