All info totally priced in…

by JackyReacher

So I made a little chart for you, because I can’t stomach the stupid “pRicEd In aLrEaDy” anymore.

S&P500

In the last several weeks we saw basically two corrections. The first one was when millions of Chinese were put into quarantine. The S&P500 dropped by 3% and a couple days later, achieved its ATH of 3393.52. This “correction” is totally absurd by itself. Nothing was priced in by this time. 3%? You telling me nobody knew about the disruption this would cause to supply chains? The info was right there for everybody that this must cause supply chain disruptions.

Now, last week resulted in a -13% decline from the S&P500 ATH. It started with Apple’s warning on revenue guidance and a bunch of other events. Ask yourself: Did this correction price in the current situation of the world (supply chain disruptions) AND impact on growth AND a possible widespread infection of the EU and the US?

IMHO, this correction partially priced in supply chain disruptions, but remains basically completely ignorant of US and EU infections. The market is still priced as if:

  • Corona didn’t arrive in the US and the EU
  • the supply chain disruption is a little -13% inconvenience and not a total clusterfuck
  • printing money in the system could fix the problem

tldr: SPY puts strike 270 or lower, next two weeks. I expect at least -20% from ATH (2,714 / $270) or more. Same for DAX and other EU indexes.

I already hold puts worth of ~70K€ on SPY and DAX and am considering buying more.

Edit: Positions. Sorry Americans, German here, UI is in German. You have to swap . and ,
Furthermore: We only have “warrants” (Optionsscheine), because access to real American options is kinda awkward. It works though, but that’s why the labels are a bit weird and I just annotated what options plays they actually are.

Positions, German UI. Stück = num of contracts, Optionsschein = warrant

 

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.

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