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TRADE BULLETIN: China (3/18) Requires Tending (FXI)

Posted on December 11, 2019

We don’t like the looks of the market now.  Nor are we certain which way she’s headed – at least in the short run.

But we do know there’s going to be one helluva wallop coming, and it’s going to catch nearly everyone by surprise.

But before we attempt to exploit that contingency, we’re going to take defensive action on a trade we opened a full nine months ago.  It still has time to run, but we feel it’s better not to chance things, given the current potentially explosive prognosis.

The trade was opened on March 18th in a letter called Play the China Trump Card, or Why Quarterbacks Should Wear Dresses.  There, we urged you to sell the FXI January 17th, 2020 42 PUT for $2.21 and buy the FXI January 17th, 2020 38 PUT for $1.16, for a total credit of $1.05.  We then suggested you buy the FXI January 17th, 2020 50 CALL for $1.55.  Total debit on the affair was $0.50.

And today?

The Chinese market looks as loose and dangly as our domestic bourse, and FXI is sitting at $41.21, slightly below our short 42 PUT.  It’s in-the-money, yes, but IT could go further.

So we’re recommending you buy it back.

Price is $1.80.

Do it and your cumulative debit on the trade rises to $2.30.

You think it’s worth it?

We’re still exposed to the Shanghai market for another month – with a long CALL and a long PUT to recoup the position, and, if we’re right, make a whole lot more.

Stay tuned.

Eschatologically yours,

Alan B. Harvard

 

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