Monday, November 10, 2014

HK-Shanghai arb and swiss interest rates

I've been sitting in H-shares that are highly discounted to their A-share counterparts for half a year now, ever since the link w/ Shanghai was announced.  Finally got huge good news.  My longs advanced huge and my shorts that are trading at slight premiums to the A-share counterparts even went down, too.  I'm lucky that the H-shares seem to be converging more towards the A-shares than vice versa.  If it had appeared to be the other way around, then I wouldn't be in this trade so heavily.  But most of my positions have doubles or better to go to close the gap w/ the A-shares.

I've been watching the CHF.EUR peg a long time since it seems the SNB is holding the CHF at an artificially low level for a long time.  This hasn't sparked any significant Swiss inflation to date, though.  However, there is an interesing referendum coming up.  The referendum is supposedly unlikely to pass, but speculative flows are obviously coming into the CHF for now, and the IVs on options for the CHF.EUR are spiking.  My thinking is that the SNB may depress interest rates in order to stymie inflows, even if the referendum doesn't end up passing, especially since inflation doesn't appear to be a threat there.  So I entered a large position in the 3-mo Euro Swiss Franc interest rate futures betting on the rates to go negative.  I haven't yet read anywhere about action being taken in this market as a bet on this upcoming event, which I like.  The risk in case I'm wrong seems minimal.  I will consider bets on the EUR.CHF and gold in the future as the date arrives...

Monday, July 7, 2014


Bought puts in TAXI, which are priced at low IVs.  TAXI may go to 0 from Uber's war.

Friday, March 21, 2014

US crude oil export ban and Russian sanctions

Soros today suggested that releasing from the SPR would be the best way to sanction Russia, if sanctioning Russia were really what we wanted to do.  But that Putin would likely retaliate, leading to escalating lose-lose scenarios.  But what about just lifting the crude export ban?  That would raise WTI prices, and also drop other worldwide prices, including Russia's, slightly.  That change would be obviously sustainable, something that would hit Putin without having an inherent timer before conditions revert, as releasing from the SPR would do.  Removing the export ban could simply be framed as beneficial to our own interests (which it is) without ever needing to mention that it hurts Russia's.  That would be a great way to avoid escalating tit-for-tat activity, although it precludes Obama from being able to come across as a tough guy to the American people, which is something he badly would like to do since his approval ratings have been falling.

In sum, while lifting the export ban obviously would be a boon for our economy, something which is often lost on government authorities, the added bonus that it would hurt Russia might serve as a catalyst for them doing so.  I'm watching the WTI-Brent spread closely....

Potential risk to the short Gazprom against russian index trade

Gazprom could do a big deal w/ China, which is supposedly close to fruition.  So I'm out of that trade for now.

Friday, March 7, 2014


I've been keeping busy trading nat gas in the US, coffee/sugar based on the Brasilian drought, corn starting a nice trend looks like, and various stocks like FNMA, which has been ripping.  Been a good few months.

W/r/t Ukraine, gazprom has long been on my hit list as headed to 0 probably eventually, but this Ukrainian conflict should accelerate the issue.  Short gazprom large, long the russian index (RSX is one ETF) smaller to hedge everyday fluctuations.

Also short the ruble.

JGBs have been a pain in the butt, but they appear to be setting up another short setup again w/ the yen dropping more the last few days and JGBs unable to go up for a few weeks.  Will look to buy puts on them again soon.

Wednesday, January 15, 2014

Current state of US refining

Now the US has figured out how to get domestically produced crude out of the mid-Continent and all the way to the coast, but regulations restrict the export of crude, refiners are converting it as fast as possible to products, which are then legally exportable.  Refiner utilization is nearly maxed out in the dead of winter.  Come busier months, something will have to give.  Either refiners will completely max out 100%, causing crack spread to spike, or crude exports will have to be allowed, increasing the price of domestic crude and disincentivizing refiners to gobble through feedstock.

How do you profit from this?  Long products such as gasoline, short Brent.  Whether exports become unrestricted or not, you should win.