Friday, April 6, 2018

The Fly Looks at Monday's Market Open

The FAZ is the 'Direxion Daily Financial Bear 3X Shares' ETF i.e. the triple-levered short of the financial names in the Russell 1000® , the Financial Services Index. 

We used to short both it and the equal and opposite (bullish) FAS in a pair trade to capture the volatility drift of the ETF wrapper  but with the decrease in volatility the trade got less and less productive and we and the rest of the herd moved on to graze elsewhere.
With the return of big vol it might be interesting again.
Special bonus: For today only readers will receive a fancy academic paper on the underlying theory of the pair trade.


Betting on Weekend Ruin; Hopping in the $FAZMobile, Yet Again
Does anyone actually believe China will not smoke US markets over the weekend with a retaliatory strike across the US farmer’s face? You need to think about the percent of goods being taxed. The last salvo of tariffs by China represented more than 30% of all US exports to China, whereas our taxes only represented 10% of Chinese goods into the US. If Trump was going tit for tat, the next tariffs proposal would be north of $150 billion.

Due to the Asian culture of saving face, there’s a greater chance of XI killing himself over the weekend than him sitting on his hands letting the great orange ape shit on him with a $100 billion slap.

My sense, buyers will try to bid this tape, but will fail. Sunday night will be a massacre, followed by a full blown Monday morning rout.

Because these are my distorted beliefs, rooted in some sort of mental malady of mine, I stepped into the FAZ mobile here for a quick spin.

NOTE: If you read this post and buy stocks anyway, you will die in a fire this weekend....MORE (video)
Here's the dissertation of a young man at NYU:
He got the doctorate and ended up working at a division of Steve Cohen's Point72 after stops at RBC and Goldman.
Good dissertation.