בס״ד

A King’s Ransom (QQQ)

Posted on September 10, 2020

[May the G-d of Israel be praised.  We’re making today’s letter available to all readers.]

A quick word on the political and social upheaval plaguing the Western world today.

It goes like this –

Democracy is done for.  It’s simply not a good system for governing (despite Churchillian assurances to the contrary).

It’s not good for large groups, and it may not be worthy of small ones, either.

Moreover, any hoping that it might be rectified or reconfigured are both misguided and vulgar.

And here’s why.

No one’s responsible!

Democracy allows the governors to hide behind the abstraction of the system, to claim that they’re legislating according to “the will of the people” or “in the name of the majority,” or some other such nonsense.

They can claim that “…the council has decided upon the following guidelines,” or “…the legislature has deemed it necessary…,” and so on.

And all the while no single person can ever be held accountable for what’s ultimately shoved down the throats of the governed.

Ever.

No one.

Yes, we have voting records, and yes we can replace those who disappoint us, but it’s all of a piece.  No one, in the end, will be forced to stand and say “I decided to build the cemetery on Jake Street with your funds,” or “I decided to pay my brother-in-law to do a survey of the Bathurst St. Salt Flats.”

No one.

Ever.

Why?

Because, by definition, a group decision negates all personal responsibility.

It was “the assembly” or “the ministry” or “the panel” or “the MOB”.

And that’s why chicanery happens.

No one’s neck is on the line!

No single soul has to step up to the plate and say – Me!  I did it!  You don’t like it?  Tough.

—————————————————————-

And that’s why we need a king.

Because regardless of what’s done “in the name of the King,” the buck stops with him.

And it’s his neck, literally, that’s on the line.

If he steps out of line, the threat of an uprising is everpresent.

He has always to worry that he’ll be killed and replaced with your guy.

It’s a system with genuine checks and balances.

Bad kings get strung up (along with their friends and families, usually, and all those who aided and abetted their wrong-doings), his fortunes are laid waste, and his legacy becomes mud.

Good kings rule for a lifetime and pass on their crowns to their sons.

So, you see, there’s real incentive there.

One-man rule.

It has a wealth of advantages.

And its time has come.

Again.

Give ‘Em a Trade, Matty

This week’s trade is payback for our colleague, Hugh L. O’Haynew, who jumped the ore-cart earlier this week and offered up a short on GLD – when he knew darn well the precious metals are the purview of THIS letter.

That being the case, we’ll ignore his ire as we lay down a perfectly straightforward SPECULATIVE bet on the NASDAQ.

Cheap and Liquid

We do it using the QUBES (NASDAQ:QQQ) because with all the current volatility, it’s hard to find options out there with outstanding liquidity and super-tight spreads.

QQQ offers us both.

And the trade is also recommended because its ultra-conservative approach still offers a spectacular 1:2.3 risk-reward ratio – even given current market fragility.

Let’s have a look at it…

To begin, the trade is short-dated, based on the expectation of an immediate decline in the index.  Expiry occurs on 25 September.

Beyond liquidity and tight spreads, we’re also choosing the QQQ’s because of all the major market indices, it has the farthest to fall before hitting support.

Take a look –

Takeaway –

  1. Three fan-lines higher (in red) speak to the end of the run that began in late March.
  2. As does the overbought 80+ read on RSI (in green), that triggered
  3. Lots of downside volume (in black).

In short, it don’t look good.

And we see no support until QQQ hits 240.

With that in mind we offer the following SPECULATIVE PUT spread on the Invesco QQQ Trust Series –

A Jew and His Gold recommends you consider buying the QQQ September 25th 270 put for $5.86 and selling the QQQ September 25th 265 put for $4.34.  Total debit on the trade is $1.52.

Rationale: we expect a decline – and quick – hence the short time horizon.

Price has to fall 4.6% by expiry to maximize winnings and 3.4% to break even.

Cheap and quick, with a very nice Risk/Reward profile.

Maximum gain on the trade is 3.48.

Maximum loss is 1.52.

Many happy returns,

Matt McAbby

 

3 responses to “A King’s Ransom (QQQ)”

  1. M T says:

    Mine for the low low price of 1.17

    Immediate decline you say?

    *starts bailing out of naked puts, lets high delta short calls ride

    😉

  2. M T says:

    Can we discuss, in transparent, time and date stamped fashion, how timely this was? Wow.

  3. Matt McAbby says:

    bs’d
    May the Holy One be blessed, MT!
    He who guides all and knows even more — may He ever bring you great entries, and even better exits!
    Matty

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