TIB: Today I Bought (and Sold) - An Investors Journal #169 - Oil, Swiss Interest Rates, Bitcoin, Cardano

A quiet day for Martin Luther King day. Interest rates are diverging in Europe. Can the Swiss cheese hold onto the holes? Oil price clears $70 and I am banking profits in big oil. Bitcoin roller coaster does its roller coaster thing.

Bought

Royal Dutch Shell (RDSA.AS): Oil Producer. Rolled up December 2020 strike 24 call options to December 2021 strike 32 call options. Locks in 90% profit since May 2016. Price has been holding above the next rung up in the staircase of options I am holding (€28). Premium on the 32 strikes was 4.125% for just under 3 years to expiry (4.55% to closing price of €28.98) and averages down the holding I already have. 4.5% to pass the strike feels doable to me with oil price now topping $70. Oil will need to go to $75 to get to 100% profit.

The key point of this trade was to bank profits and to buy more time for a continued run up in the oil price. I noted also that Shell made a big investment in solar power in US markets.

In this portfolio my exposure is through holding the stock and strike 28 call options expiring in 2020 and 2021 and 32 strike expiring in 2021. I am also short strike 40 call options written against the 28 strike calls.

Shorts

Euroswiss 3 month interest rate futures (SM018): I have had good success in recent weeks being short US and especially European interest rates (Euribor). I have noticed that long dated call options I am holding on US Dollar Swiss Franc have been falling in price - i.e., Swiss Franc has been strengthening. That prompted me to have a look at Swiss interest rates (and I noticed my broker has recently introduced CFD contracts on Euroswiss futures).

This chart is in the back of my head - it is a chart of Euribor futures for December 2020. It shows that rates are expected to rise (futures price is falling) - it also shows my profitable trades

My broker was only offering Euroswiss futures contracts out to September 2018. What I saw there was that rates were not rising - they were falling/holding. My sense that if rates are rising in Europe they have to rise in Switzerland. The only thing that can be changing that is safe haven flows - and the world is not really panicked about that at the moment. I sold contracts short based on that view and the evidence from the 2020 Euribor charts.

Now digging in a little deeper here is a like for like chart comparison over the last 3 months for Euribor September 2018 futures. This shows quite clearly that price has fallen from the December highs of 100.31 (i.e., a negative interest rate of 0.31%).

The same chart for Euroswiss futures (same duration) show that rates actually fell from the December level and have now settled at the same level at 100.65 (i.e., a negative interest rate of 0.65%).

Now there is a big bear in the room on this trade. Swiss Franc is getting stronger as the US Dollar weakens. This is bad for Swiss exports. A rising interest rate tends to encourage funds to come in that direction (I must add rising but still negative). That also strengthens the Swiss Franc. The bear in the room is the Swiss National Bank - can they let the Swiss Franc get any stronger? Can they resist the tide of rising rates? The other risk in the trade is that I am right but it does not play out before September 2018. I am figuring that the Euribor chart is already answering that question - in direction and level. There is a 30 basis point difference between the charts - I think that level has to halve if the rates pressure continues the way it has been. A 15 basis point move up on Euroswiss rates will be a humdinger of a trade win

https://www.theice.com/products/37650324/Three-Month-Euro-Swiss-Franc-Euroswiss-Futures/data

Last two charts from https://www.theice.com/index

Cryptocurency

Bitcoin (BTCUSD): Bitcoin price tracked sideways for a lot of the day. I did add one more position on one of the mini-reversals in my Bitmex account. I did not put a profit target on the trade - disappointing as price tested the previous highs and has since rejected that level ($14,400). It is now back to testing the $13,200 lows.

I did also put on a trade on my CFD broker account - just testing things out there as they were allowing trades. Trade was looking for momentum to continue on the 4 hour chart. It did and I had no profit target on the trade. Disappointing also to see how much wider spreads are for this broker - will not be trading here again.

Market news (again) is that China is clamping down on cryptocurrency trading activity. The reports are unconfirmed but that is always enough to scare markets especially when it involves China

http://www.afr.com/technology/china-escalates-crackdown-on-cryptocurrency-20180115-h0isk8

With the big drop, I added a 4th position to my Bitmex account at $13,210 - waiting for the scared money to take their fingers off the sell button.

Cardano (ADA): Closed out one of my positions at 6215 for a BTC 0.00000393 profit (6.7%)

Currency Trades

Forex Robot closed 6 trades (0.27% profit) and is trading at a negative equity level of 6.4% (higher than prior day's 6.3%). Nice to see trades close for profit more frequently - second lot in less than a week. But then there was a lot of movement against the US Dollar in currency markets.

Outsourced MAM account I run an outsourced forex trading account with Actions to Wealth. They closed out trades for 2% profits for the day.

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas

Images: I own the rights to use and edit the Buy Sell image. News headlines come from Australian Financial Review. All other images are created using my various trading and charting platforms. They are all my own work

Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex

Bitcoin: Get started with Bitcoin for as little as €50 (in Bitcoin) and earn Bitcoin at a rate way better than your bank will offer - think weeks instead of months.

http://mymark.mx/Mark

January 15, 2018