• TheStrangle

To bail or what?

We just opened a Strangle on HSBC. Banks are lagging the market so they might catch up. On the other hand, HSBC has exposure to China and is laying of 30.000 employees. Besides that it is at the bottom of its trading channel. Kind of a no-brainer for us.

Looks like every technology stock is up up way up. But everything else is up as well - take Tesla or even Dominos Pizza which jumped today to over 370 $ (in words: Three hundred seventy US dollars). What can normal investors buy that is not way over the top? Good question. But we do not care. We are TheStrangle and we are just looking for stocks that might go further up (boom) or fall like a stone (bust).

And we might have found a new one with the bank HSBC.

a) They are trading in a range between 39 $ and 36 $ for hald a year. Before that they were trading in a range between 46 $ and 40 $. So even if we ignore all the bad news surrounding them it might be a good time to buy a strangle cause they hit the bottom of their current range.

b) But Banking in general is way behind the current market trend. Stocks like Shopify, Nvidia, Tesla, Microsoft, Apple, ... the list goes on forever, are reaching prices we would not have dreamt of 3 years ago. The only two big sectors that are not participating in the current mega BULL run are Energy and Banking (btw - we might open a strangle on coal very soon). So this is another argument for looking at a bank strangle.

c) And then there is bad news around HSBC all over the place. Last year in October they announced to lay off 10.000 people. And now after a profit miss they plan to layoff 35.000 people in 2020. Operating expenses jumped 22.2% to $42.35 billion. MarketWatch writes "HSBC Holdings profit plunges 53%, will suspend buybacks amid revamp". A well running engine sounds different to us. BUT to make matters worse: Most of their business comes from China and China is suffering huge from the Corona Virus. Check this great video from George Gammon "Banks Are Failing: You're Going To Bail Them Out"

OK we have no clue how all of this will play out for HSBC, but it sounds like an environment where the stock could fall like a stone. On the other hand the stock might rise cause all bad news is already baked in (just consider that today the stock just lost 0,14%).

Long story short - > we decided for a HSBC strangle. Check out the details in our portfolio.

In that sense - Strangle ahead !

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