Yo Pit Crazies,
You have probably heard Bill Griffo and I talk about Chinese equities, and the only ones we are interested in are the domestic Chinese stocks, not the American depository receipts (ADRs).
That ticker is the Xtrackers Harvest CSI 300 China A shares (Ticker: ASHR).
Today, the Omicron variant is causing a massive lockdown in China, which is odd considering the rest of the world is just progressing to the endemic stage.
Chinese stocks are getting sold hard, but I don’t think COVID is the only reason. ASHR is getting sold with the others.
Something else is afoot.
KWEB Is Down 80% in One Year
You read that right.
The Kraneshares Trust CSI Internet ETF (KWEB) – with Tencent Holdings Ltd. (Ticker: TCEHY) and Alibaba Ltd. (Ticker: BABA) – is down 80% from its highs in 2021.
For reference, the Invesco QQQ Trust (Ticker: QQQ) was down 85% two years after the dot-com boom imploded on the heels of Worldcom Inc. collapse.
It’s almost like everyone is looking at Russia and saying, “I do not want to hold the bag if Chinese ambitions stretch too far off of its shores.”
Like it or not, prices are starting to reflect a new power structure in overseas markets.
That is something to watch.
VOL MAN is seeing 10-day realized and implieds at peak prices. I am not sure this is capitulation, but it must be getting close. For reference the Russian stock market is still not opening this week.
KWEB two-year chart with one-day candles and 90-day implied vol in green on the bottom.
When a government cares more about its ambitions than economic growth, that is a bad recipe for stocks.
Chinese dismantling of internet stocks is giving folks pause about what they are getting when they buy a stock. Russian assets are a painful reminder.
THE LESSON: When we buy stocks, we buy the governments with them.
The Rundown
Capitol Gains w/ Frank Gregory
I filled my strangles in the iShares Global Clean Energy ETF (Ticker: ICLN) and am close to a sale for 50% gain on the puts already.
Option Shopper
Licia went shopping for Verizon Inc (Ticker: VZ) puts last week. VZ is soft like other stocks.
Power Income Trader
If you missed last week’s event, you should know this …
Griff closed the SPDR S&P 500 trust (Ticker: SPY):
The new POWER GAINS combo grants you a quarter of full access Capitol Gains AND Power Income Trader …
(And if you’re already a Cap Gains or Power Income trade, call Customer Care from 9 a.m.-5 p.m. ET for special pricing at 1-888-872-3301.)
Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session.
The talk in the Pro Room yesterday was the demise of the Barclays iPath Series B Short term VIX ETN (Ticker: VXX) .
The product is no longer issuing creation units which will add to the volatility and the possibility the product will not track VIX futures very well anymore.
Nitro Trader
Volatility Edge & Volatility Trading Club:
The Option Pit VIX Light Is Green, as the market for VIX futures is in full backwardation. SPX is still going up and down with around 2%+ moves per day.
Oddly at this higher VIX level, there has not been much movement in the vol products.
This week might be different with the Fed interest rate news coming.
To Your Trading Success
AG