I still think we're headed for a recession, now the debt ceiling is resolved the Fed's Net Liquidity should fall as they refill the TGA. With the VIX at 3 year lows, and SPX concentrated on a record few number of stocks, I bought 4 SPY puts (strike 410 15thDec23) at 10.08. Its 0.5% of my portfolio, with 4X upside if SPY drops 17% to its 2022 lows. Aim to buy a few more puts next month, and the month after. Aim is to buy at VIX 13 and sell in the 30s.
Why 6 months out? The Fed's Net Liquidity probably takes longer to reduce than expected. Probably pushed out till July/August. The numbers below show the Fed's Net Liquidity every Wednesday: in the week after the debt ceiling resolution, the TGA increased but RRP decreased by almost triple that amount, so Fed Net Liquidity actually increased.
70% of options expire worthless. And I was expecting a bear market 6 months ago. So maybe I'm just burning money. But the risk/reward is worthwhile. Everything takes longer than we expect.
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