U.K.E.U.X-IT… (DIA,QQQ,SLV,NEM)

Isn’t it just our luck.

 

On maybe the most important day for markets in the last five years, we’re expected to offer a trade.

 

Fergawdsake…

 

Not that we’re shy, or lacking in opinions.  You know us too well for that.

 

Just that this Brexit shtick could send things whirling over the near term and foil all our efforts to show you our true trading genius.

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We so want to please you…

 

Not to worry, though.  We’re still here in every way, even as we rigorously contemplate our own shortcomings and goings and question the value of our own intelligence, and admit: we haven’t the foggiest which way this vote’s going to go.

 

Lacking in Spies

 

What we’d really love is an old time spy to go way undercover for us and infiltrate the Bilderberg world, set up cameras in the Clinton Foundation and the Kardashian bidet Davos cocktail lounge.  We’d love to have someone dive under the rubble and record all the juicy goings-on of the real string pullers and egg shakers out there.

 

Maybe that way we’d have a clue.

 

But alas, we’ve none.  And in truth, that’s the way we like it.  Knowing what will come of this latest poll in Britain is a guessing game we’d prefer not to enter.  Indeed, we’re of the opinion that even if we had the undercover figures we dream of, it wouldn’t help us in the trading arena.

 

Why?  Because even spies have agendas.  The same two agents moving through the same worlds, reviewing the same intelligence will just as often take sides against one another when conclusions are to be drawn.  And it’s all inevitable, and it’s all part of the game of life, friends.  We pray only for the wisdom to see through the fog and the agenda-driven nonsense that encompasses us, and that we be guided toward the greater Truth, away from those spies with axes to grind and careers to advance.

 

And as for the Brexit?

 

We’ll trade it as we do everything else.

 

We’ll simply follow the herd.

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But before we get there, we have several open trades to examine.

 

The first was our March 31st initiative in a letter called Newmont vs. the Ratio Spread, in which we pronounced the need to purchase one at-the-money NEM June 26 PUT for $1.87 and sell four (4) NEM June 21 PUTs for $0.41 each, for a total debit of $0.23.

 

And what happened?

 

Precisely nothing.  Everything ended out-of-the-money, and we lost $23.

 

Next was our April 21st trade.  The letter was called End of the Bug Bear, and there we urged you to sell ten (10) SLV June 17.50 CALLs for $0.30 each and buy ten (10) SLV June 19 CALLs for $0.14 each, for a total credit of $1.60.

 

And that, too, is where that ended.  All options expired out-of-the-money worthless and we took home 100% of our original premium.

 

Rah! Rah! Team!

 

Finally, as we go to press, we see that with today’s trade our June 16th venture has been stopped out.  Our original directive from the letter Dip and Fly read as follows: consider the purchase of the QQQ June 30th 105 PUT for $0.98.  Close out on any move north of 108.25.

 

The 108.25 stop was triggered today just after 11:00 a.m. EST.

 

It’s difficult to determine an exact P&L for this one, as timing is everything and slippage can account for a great deal of movement in any final sale.  Additionally, many online brokerages don’t allow for stop orders on options, further complicating the close-out process.

 

So we’ll leave it to you to make the calculation for yourself.  It’s likely to have ended with a small loss under the best execution and trading circumstances.

 

A Change of Heart

 

Sometimes the spies we’re looking for come to us by way of the weekly presentations of the banks and brokerages we cover.  And this week, a very noteworthy tidbit struck our desks from the folks at BofA/ML.

 

It looked like this –

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The chart depicts net equity buy and sell numbers for the firm’s clients since the beginning of the year.  And clearly, what’s most interesting is the flip to the buy side as of last week  (in red) – despite the Brexit hype, despite the Fed’s admission of impotence at the latest Humphrey-Hawkins testimony, despite growing tensions between NATO and Russia and the renewed potential for a Chinese market meltdown.

 

One has to ask why now?  What’s motivating these folks gird their loins at this point?

 

And the answer is equally clear.

 

It doesn’t matter.

 

New funds will enter the market in the stealthiest manner possible.  They’ll do it precisely while everyone’s looking the other way, distracted by what the media is telling them is ‘important’.  And it’s overwhelming how much hype surrounds the current Brexit story.

 

Know it well.  There’s something of an inverse relationship that obtains between the focus a story receives in the mainstream press and either its accuracy or importance.  Again, another example of spies with an axe to grind.

 

Best always to avoid the hype.  Completely.

 

Just look at the charts.

 

Today’s Trade

 

We’re focused today on the hype of the Brexit machine and the likely outcomes of any moves generated by it over the short term, and our thinking goes like this –

 

There will be a strong move in either direction as results are announced; we don’t know which.  That calls for a long straddle strategy in the short term.

 

At the same time, we see a post vote rise in the market as inevitable, a move that will follow the realization that the entire Brexit hype-out was nothing more than a standard media effort to sell advertising.

 

C’est tout.

 

It’s a ‘strap straddle’, and the details are like this –

 

- Content protected for Normandy Executive Lounge, Option Trader Elite members only]

Get ready to dump the CALLs on any surge, and the PUTs on any decline.

 

Keep an eye on it!

 

Many happy returns,

 

Matt McAbby

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