It's hard to talk about economics nowadays without mentioning Russia. This morning as I read the latest regarding their highly disturbing invasion of Ukraine I could not help it, but to think about #gold.
A few years ago I read an article that the Russian central bank was buying gold at a ridiculous rate so I thought to myself that they must have planned the invasion for 10 or even 15 years and already anticipated that they will be hit with heavy sanctions, which initiated their gold buying frenzy.
So let's take a look at their central bank's gold reserves and the gold price:
According to tradingeconomics.com their reserves were at 2298.53 tonnes in September so they most likely have more than that today.
I don't have access to all the info to calculate how much their wealth grew over the past 10-15 years but what we can assume with high confidence is that since the end of January the 11.7% gold price increase grew their wealth by over $17bn.
On top of that, considering that they are the third largest oil producers of the world, accounting for 11% of global supply, their wealth must have increased by an astronomical figure due to the 38% oil price increase since the end of January.
What does this have to do with Tycoonitos?
The same way as the Russian leaders most likely hedged against all the sanctions that they anticipated, we also have to always look at how we can hedge our positions with minimal costs.
After a year like 2021, when option traders could make a killing just by selling naked puts, it can be a bit difficult to adapt to the market conditions of 2022. Selling naked put in 2022 mostly generated heavy losses so it is best to focus on strangles. However, on the flip side it can be stressful to think about a market rebound as if the rebound is too fast then traders can find themselves getting hurt (big time) on the call side.
It's trading at $46.61, which seems like a bargain considering that in mid January it was over $65. The approximately 30% drop in a mater of few weeks is pretty substantial but it's not the first time that it happened to this stock. If we look at the 20 year monthly chart, we can see that it has a nice wavy pattern and currently the stock is approaching the bottom of it's current wave. At $40 I would say that this stock is really attractive.