Volatility

Russia’s invasion of Ukraine is the first in the next generation of energy wars

Russia’s invasion of Ukraine is the first in the next generation of energy wars

Oil and other fossil fuels aren’t going to go quietly. And it’s extremely unlikely that the countries whose global power is predicated on oil are going to give up that power easily. From this viewpoint, the Russian invasion of Ukraine is the first in the next generation of energy wars, as fossil-fuel powers fight to extend their power into a new global energy age.

Tomorrow is options expiration day–watch for the downside

Tomorrow is options expiration day–watch for the downside

$2.2 trillion of options are set to expire on Friday. That includes $545 billion on individual stocks, Goldman Sachs estimates. And about $985 billion of S&P 500-linked contracts and $165 billion in options tied to the SPDR S&P 500 ETF (SPY), the world’s largest exchange-traded fund, Bloomberg reports.
During the last year equity indexes have shown a reliable pattern of lurching lower near the expiration Friday

So what was Monday? A bottom for stocks, just one of those oversold bouncy things, or something else?

So what was Monday? A bottom for stocks, just one of those oversold bouncy things, or something else?

Yesterday stocks reversed direction big time. After days of pounding lower the Standard & Poor’s 500 gained 1.89% and the Dow Jones Industrial Average added 1.17% The NASDAQ Composite climbed 3.41% and the NASDAQ 100 tacked on 3.29%. Even the small cap Russell 2000 gained 3.05%. On those numbers I ‘d say the days action looks like a big oversold bounce off of a truly terrible January. But dig a little deeper and it looks like something else–or maybe additional somethings–was going on.

Putting on those emerging market hedges ahead of schedule–today, right now–buying EWZ and EWW Put Options

Putting on those emerging market hedges ahead of schedule–today, right now–buying EWZ and EWW Put Options

When I posted over the weekend that coming increase in interest rates from the Federal Reserve and the possibility of soaring energy prices from a Russia/Ukraine conflict and the ensuring sanctions by Western allies against Russia constituted a double whammy on emerging market assets and developing economies. A strong dollar and higher U.S. interest rates would exacerbate a looming debt crisis (yes, yet again) in the developing world, and higher oil and natural gas prices (and tighter supplies) would hit developing economies really really hard. I said then that I’d be looking for hedges to insure against and profit from the downside risk in emerging market assets. Well, things have moved faster than I expected

2 Threats to Emerging Markets: Is This a Developing Short?

2 Threats to Emerging Markets: Is This a Developing Short?

Emerging markets and developing economies are looking at two very big and relatively near-term threats. First, and we know this one is coming, interest rate increases by the Federal Reserve could trigger a new debt crisis. Developing country debt repayments to creditors are already running at their highest level in two decades–even before higher U.S. interest rate and a strong dollar increase the burden on emerging markets and currencies.

Putting on hedges for a Russia-Ukraine conflict today (as in NOW)

Putting on hedges for a Russia-Ukraine conflict today (as in NOW)

On Saturday, January 15, in my “Saturday Night Quarterback” post wrote that conflict (a more comprehensive term than “war) between Russia and Ukraine remained a low probability event–but that the probability wasn’t zero and the the odds of conflict had increased in the past month. What’s happened since then? The odds of conflict have climbed

Selling my VIX Call  Hedge–and a reminder of why we hedge and when we buy

Selling my VIX Call Hedge–and a reminder of why we hedge and when we buy

The CBOE S&P 500 Volatility Index (VIX) is up another 8.87% today to 27.83 on another drop in stocks and continued worry about the effect of looming Federal Reserve interest rate increases. Today I’m going to sell the February 16 VIX Call Options with a strike of 20 (VIX220216C00020000) that I bought on December 31, 2021 in my Volatility Portfolio. I bought those Call Options for $380 a contract and I’m selling today, January 21 with those options trading at $710 a contract as of 2:45 New York time. That’s a gain of 86.8% on this position in roughly four weeks.