Market comments 20221019

The Chinese market (FXI) is really struggling and I wonder if we are going to see an entry point for put options or long-term call options sometime soon.

Over the past 5 years the Chinese large cap stocks have lost nearly 50% of their value while the S&P500 gained nearly 43%.

This year has been a challenging year for most investors around the world and the Chinese stock continued underperforming the US market.

But from the traders' point of view, none of this really matters unless we can profit from it somehow.

So what could we do?

Unfortunately there is not enough volume in the long-term options so it's difficult to estimate what prices we would get filled at, but based on the last transaction prices we could buy the Jan 2025 $25 call and sell the $25 put if we believe that the stock is going to stay above $25 in a bit over 2 years time.

Alternatively we could buy a call vertical (e.g. buy $24 call and sell $25call, which would cost about $0.30) and finance it by selling put option with a much lower strike price (e.g. $15). In fact, it appears that for each put option we could buy multiple call verticals. With this strategy if the price stays above $25 at expiration then we could be up for a huge profit.

Sometimes I try my luck with these sorts of strategies. At the moment I have something similar in CCL.

So what's my trade for today?

#LVS (#LasVegasSands) earnings with a put option. The stock has been near it's lowest levels for some time so I would not take the risk to the up side during earnings.

The stats

Trade Type: Short Put

Strike: $31

Expiry: 18 Nov

Delta: 21

IV Rank: 69.2

Premium: $0.94

Cap Req: $404

Annualised Prof at Expiry: 283%

IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.

Closed:

https://www.tycoonitos.com/community/market-comments/market-comments-20220919

https://www.tycoonitos.com/community/market-comments/market-comments-20220921

Rolled:

https://www.tycoonitos.com/community/market-comments/market-comments-20220915

https://www.tycoonitos.com/community/market-comments/market-comments-20221018

Let me know what you think.