Wattie
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And 21st Century Herald confirms that China's securities regulator CSRC has reportedly notified brokerages to suspend short selling of stocks from Feb 3...
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Wattie
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Can you explain this for the “thicko’s” around here. Ie me.
On second thoughts don’t bother as it won’t alter my “thickness”.
Froddy
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Hi Wattie,
What it means is that I've bought options (stock derivatives) in the S&P (SPX) and Tesla (TSLA). These are "puts" as I'm wagering that both instruments will decline. The opposite of a "put" is a "call".
Options have expiry dates and I've wagered that the S&P will get close to 3000 points by February's monthly expiration (the third Friday of the month), and will get close to 2000 points by the May expiration; as regards TSLA, this gapped up following its recent earnings report, and I have wagered that it will retreat to its pre-earnings value by February's monthly expiration. The S&P 3000 trade was originally placed as a cheap "hedge" to protect my long positions; the S&P 2000 trade was placed as (an even cheaper) lottery ticket trade in case of a crash (which we may now be facing) with a reward:risk ratio of 115:1 if it comes off. The TSLA trade was placed last week as, historically, the stock likes to fill price gaps. The R:R on that trade is 32:1.
The trades I've placed are "out the money" (OTM) as they have no intrinsic value as the stock has not yet fallen to the level I've wagered. Their value is presently only measured by time (extrinsic value), and this decays as we get nearer expiration. Because of this, they are cheaper than "in the money" (ITM) options which have an intrinsic value at the point of purchase. In the event that the SPX and TSLA options move "into the money", the options will pick up value very quickly.
So what MaseratiGent was saying is that, in circumstances in which the markets could move sharply downwards, it may be worth risking the (normally) improbable by purchasing cheap OTM puts as, if they come off, the returns can be healthy. He then went on to say that a lot had been "priced in"; this is because in times of low volatility, put options are cheap, but they become more expensive as volatility increases. So the risk:reward which I got when I bought my OTM SPX puts in December would not be the same if I bought those options today.
As regards "butterflies" this refers to the type of spread trades which I have placed, best explained here:
https://www.investopedia.com/articles/optioninvestor/09/profit-out-of-the-money-butterfly.asp
Hope this helps!
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Wattie
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Thank you for the time you’ve taken to explain- sounds pretty complicated but I understand the “covering risk”aspect your introducing.
It’ll be interesting to see what transpires.
Good luck with the positions.
Wattie
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investors beware, yesterday’s stock market rise looks like a “dead bat bounce” to me.....or Fed intervention
www.wsj.com
Fed Adds $59.85 Billion to Financial Markets
The overall amount of temporary liquidity provided by the New York Fed rose on Monday. The central bank added $59.85 billion in fresh liquidity to money markets.
www.wsj.com
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Wattie
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This tragedy presents an opportunity and I may have a case of wine to fund in 6months.
I have therefore invested in
ABBV and now
Gilead
www.marketwatch.com
Next 3M as masks sell out.gotta be worth a punt.
I have therefore invested in
ABBV and now
Gilead
China scientists want to patent Gilead drug to treat coronavirus patients
The government-run Wuhan Institute of Virology said this week it applied for the patent in January along with a military laboratory. An institute statement...
www.marketwatch.com
Next 3M as masks sell out.gotta be worth a punt.
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MaseratiGent
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I spent the week buying OTM puts on the DAX and FTSE mostly April and some March & June. With the lockdown Coronavirus growth (believing official figures) is 20% per day.
The market overcame initial panic and rallied, then it's dawning the impact on supply chains and Western firms' P&L, the final penny to drop will be the reality that this can't be contained; the lockdown is unsustainable.
I suspect the market gets nasty 2-3 weeks forward of here. Time for some helicopter money!
The market overcame initial panic and rallied, then it's dawning the impact on supply chains and Western firms' P&L, the final penny to drop will be the reality that this can't be contained; the lockdown is unsustainable.
I suspect the market gets nasty 2-3 weeks forward of here. Time for some helicopter money!
Froddy
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Many congrats, Wattie - beautiful trades - you must be delighted with how they've performed today!
Wattie
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Two trillion already injected by China,
Fedo repo on max.
I thought this was pertinent, whilst somewhat tragic
“Earlier this morning, the Fed had the temerity to lament that "asset valuations are elevated" even as it hinted that as a result of the coronavirus pandemic, which presents a "new risk to the outlook", it may ease further as if printing money can somehow vaccinate people against a deadly virus. Meanwhile, in response to the repo market crisis last September, which should have been long contained by now, and yet which just saw the two most oversubscribed term repo operations in months this week as dealers literally scrambled for liquidity just as the Fed trimmed the operation by a tiny $5 billion to $30 billion ..”
Bad news is good news for markets as they create money from thin air to maintain the illusion all is just fine.
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Froddy
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Greatland Gold looks … um … great! Well done AT3200AC - you must be delighted too!!
Comparing last week's chart: https://www.tradingview.com/x/zVOJcMEW/
With this week's chart: https://www.tradingview.com/x/wLQh6qSM/
Shows that the worrying 4 level (selling resistance zone) has been broken and, significantly, the volatility squeeze has fired (circled area now has a green dot under the blue bar). Typically, this will go on for 8 - 10 bars (i.e. 8 - 10 months). Fingers crossed for you!
Wattie
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Thanks,
Both up again today...ABBV by 5% plus.
My bet with C has everything stacked against it. Central banks will print to the moon.....to keep this Ponzi scheme alive. May as well go along for the ride, book profits and then get out of dodge before the shtf and it all comes down.
just playing the global liquidity game.....with a little knowledge.
Both up again today...ABBV by 5% plus.
My bet with C has everything stacked against it. Central banks will print to the moon.....to keep this Ponzi scheme alive. May as well go along for the ride, book profits and then get out of dodge before the shtf and it all comes down.
CatmanV2
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My guess is that you'll be paying for my case of wine but you'll still ahead with the profits.
C
Wattie
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Yup that was an excellent call up almost 10% today. I’d be in that if I held £, but I don’t anymore. I,m loaded up with aud$ and $ gold miners as I expect them to rise even further when central bank induced insanity gives way.
Froddy
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Don't write off your bet, Wattie: nobody knows what's going to happen, and there are quite a few technical reasons to support your view.
First, S&P Fibonacci timing which I mentioned last night has been confirmed: https://www.tradingview.com/x/KrrmULe4/
As has aussie/yen continuation: https://www.tradingview.com/x/vOExGgpb/
Secondly, and which I've not previously posted:
- S&P has hit (and so far has been rejected by) the 1.618 Fibonacci extension of the December 18 low to April 19 high on the weekly chart: https://www.tradingview.com/x/gexSsWYs/
- S&P is 2 points off the 2.618 Fibonacci extension of the July 19 high to August 19 low on the weekly chart: https://www.tradingview.com/x/DfIwpibj/
We may see a small bounce next week (to c. 335) and then the second Fibonacci timing extension comes into play: https://www.tradingview.com/x/DqqDhUux/
Who knows?!
MaseratiGent thinks it's looking bleak - my money's on him!
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Wattie
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Froddy did your Tesla position trigger last week....I saw it got battered around 18% one day!
Froddy
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Not yet - I need it to land within the earnings gap by (and preferably on) 21/2 for max profit - happy for it to do it's own thing in the meantime - it takes patience (and a lot of gin)!
Wattie
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I really wish I had the understanding and confidence you and MaserG have to play these markets.
I simply don’t so as a result have to keep it simple with long calls in researched positions, capturing profits and a lot of gut feeling!
I’m in the bleak camp with a don’t fight the Fed mentality.
Coronavirus May push Central banks to the end of their credibility if a solution to the global infection spread is not found soon. Given the known disease parameters I can’t see anything other than an enforced lockdown of the public stemming its spread....like China is doing.
6 months is a very long time for this to develop
AT3200AC
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Thanks Froddy - the SP has felt unstoppable over the last few weeks. Interesting that your 8-10 months chart prediction aligns with Greatland’s farm-in partner Newcrest publishing a Maiden Resource Estimate at Havieron in Western Australia. At the moment they can’t find the end of the discovery after a year of drilling with cautious estimates at 5.5M oz gold identified so far and a bucket load of Copper too.
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