There are two basic building blocks in DeFi/OpFi though: 1) stablecoins as you need a non-volatile currency to get access to this market and 2) a dex to be able to trade all these financial assets. The rest are built on top of these blocks.
So far, together with our partners and community, we have worked on developing these building blocks with XSGD as a stablecoin. We are working on bringing a USD-backed stablecoin as well. We will soon have a decentralised exchange developed by Switcheo. And with HGX going live, we are also venturing into the tokenization space. More to come in the future.”
submitted by IsNullOrEmptyTrue to wallstreetbets [link] [comments]
Listen up autists because you are about to get your ass saved by this knowledge I'm about to drop on you. Because today we're going to learn about hedging strategies. I've noticed that some of us may be confused on how to limit downside risk.
For those of you lazy bananas just waiting for the TLDR, well here it is:
First, let's get clear on what a hedge refers to. According to Investopedia:
A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.
Believe it or not, but options are not just for playing the market like casino chips.
In fact, they can be used in combination with regular stock, or along with other assets, to reduce risk and maximize returns.
Options accomplish 2 primary things:
Shit happens quickly, as we saw Friday. Unless you fart magic you're not going to predict when it will shift. Luckily, you don't need to with these simple tricks.
Trick #1: The Straddle
It is not just what your wife does to the neighbor while you film. It is also what you can use when you don't know whether witches will appear as promised, or if stone cold warlocks will grab your balls and squeeze them for max pain.
A long straddle is a combination of buying a call and buying a put, both with the same strike price and expiration. Together, they produce a position that should profit if the stock makes a bigly move either up or down.
As you can see, the the above scenario may come in handy for days like Monday where we are all basically 50/50 whether it will be upsies or downsies.
It is the Schrodinger's cat of options plays. Except, either of the two states will result is an alive portfolio.
Literally can't go tits up, unless you suffer from IV crush, or it goes sideways..
Which leads us to:
A short straddle is an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date. It is used when the trader believes the underlying asset will not move significantly higher or lower over the lives of the options contracts.
Use the above scenario when the underlying asset is trading inside a defined range.
Be careful, because any escape up or down will mean certain doom.
You should be aware that selling a call and a put implies that you own shares of the underlying security, otherwise you will be on the hook to purchase if it goes the wrong direction.
When it comes to buying straddles you need a decent amount of cash to buy both a call and put for the same strike price.
Also, what if you are certain that the stonk will go up but still want some downside protection?
That leads us to:
Trick #2: The Strangle
A strangle is an options strategy where the investor holds a position in both a call and a put option with different strike prices, but with the same expiration date and underlying asset. A strangle is a good strategy if you think the underlying security will experience a large price movement in the near future but are unsure of the direction. However, it is profitable mainly if the asset does swing sharply in price.3Example:
Say Friday you decided to hedge on witches and bought an SPY 3/20 $280c like a retard.
Had you also purchased an SPY 3/20 210p you may have come out ahead, or at least retained your principal.
The long strangle, also known as buy strangle or simply \"strangle\", is a neutral strategy in options trading that involve the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date. Long Strangle Construction.
Just as with straddles, strangles can go long or short. To retain a position on a security that you expect to trade sideways you can use the short strangle.
The short strangle, also known as sell strangle, is a neutral strategy in options trading that involve the simultaneous selling of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.
Maximum profit for the short strangle occurs when the underlying stock price on expiration date is trading between the strike prices of the options sold.
At this price, both options expire worthless and the options trader gets to keep the entire initial credit taken as profit.4
Trick #3: Selling Call Options
A covered call is an options strategy involving trades in both the underlying stock and an option contract. The trader buys (or already owns) the underlying stock. They will then sell call options for the same number (or less) of shares held and then wait for the option contract to be exercised or to expire.
This is the most basic way to profit from your portfolio in a situation where the stock may not move up in price. That way you can keep your shitty JNUG shares and earn money while they slowly move down to $1. Just sell an OTM call, but make sure that you have at least 100 shares of JNUG for each contract sold otherwise you'll have a margin call if it goes up beyond your strike price.
Trick #4: Credit Spread
The call credit spread is a bearish to neutral options trading strategy that capitalizes on theta decay and downward price moves in the underlying asset. It is comprised of a short call and a long call, and is sometimes also referred to as a “bear call spread.”
The call credit spread option strategy also works in minimally rising markets, as the trade will be entirely profitable if the underlying asset closes below short call strike price at option expiration.5
Stock XYZ is trading at $50 a share.
Take care to review the below resources and watch some YouTube to fully understand these plays before partaking. It is important that you understand how to properly leverage and control for risk to avoid a massive GUH when you fuck up.
Implied Volatility on SPY and Other Assets - Important Info
One of the most practical applications of the above strategies is to
Hedge vega (the quantifiable proxy for IV on option pricing). Vega represents the change in an option value for a 1% change in IV.
If you autists aren't taking the bare minimum protections to hedge against downside risk, especially for VIX then you have no-one to blame but yourself if you get pinched.
Take a read of the post(s) I mention above and be sure to ask any silly questions below if you get stuck. Remember, there are no silly questions, just silly people. Thanks and goodnight.
For this week's edition of DDDD (Data-Driven DD), we're going to look in-depth at some of the interesting things that have been doing on in the market over the past few weeks; I've had a lot more free time this week to write something new up, so you'll want to sit down and grab a cup of coffee for this because it will be a long one. We'll be looking into bankruptcies, how they work, and what some companies currently going through bankruptcies are doing. We'll also be looking at some data on retail and institutional investors, and take a closer look at how retail investors in particular are affecting the markets. Finally, we'll look at some data and magic markers to figure out what the market sentiment, the thing that's currently driving the market, looks like to help figure out if you should be buying calls or puts, as well as my personal strategy.submitted by ASoftEngStudent to wallstreetbets [link] [comments]
Disclaimer - This is not financial advice, and a lot of the content below is my personal opinion. In fact, the numbers, facts, or explanations presented below could be wrong and be made up. Don't buy random options because some person on the internet says so; look at what happened to all the SPY 220p 4/17 bag holders. Do your own research and come to your own conclusions on what you should do with your own money, and how levered you want to be based on your personal risk tolerance.
How Bankruptcies WorkFirst, what is a bankruptcy? In a broad sense, a bankruptcy is a legal process an individual or corporation (debtor) who owes money to some other entity (creditor) can use to seek relief from the debt owed to their creditors if they’re unable to pay back this debt. In the United States, they are defined by Title 11 of the United States Code, with 9 different Chapters that govern different processes of bankruptcies depending on the circumstances, and the entity declaring bankruptcy.
For most publicly traded companies, they have two options - Chapter 11 (Reorganization), and Chapter 7 (Liquidation). Let’s start with Chapter 11 since it’s the most common form of bankruptcy for them.
A Chapter 11 case begins with a petition to the local Bankruptcy court, usually voluntarily by the debtor, although sometimes it can also be initiated by the creditors involuntarily. Once the process has been initiated, the corporation may continue their regular operations, overseen by a trustee, but with certain restrictions on what can be done with their assets during the process without court approval. Once a company has declared bankruptcy, an automatic stay is invoked to all creditors to stop any attempts for them to collect on their debt.
The trustee would then appoint a Creditor’s Committee, consisting of the largest unsecured creditors to the company, which would represent the interests creditors in the bankruptcy case. The debtor will then have a 120 day exclusive right after the petition date to file a Plan of Reorganization, which details how the corporation’s assets will be reorganized after the bankruptcy which they think the creditors may agree to; this is usually some sort of restructuring of the capital structure such that the creditors will forgive the corporation’s debt in exchange for some or all of the re-organized entity’s equity, wiping out the existing stockholders. In general, there’s a capital structure pecking order on who gets first dibs on a company’s assets - secured creditors, unsecured senior bond holders, unsecured general bond holders, priority / preferred equity holders, and then finally common equity holders - these are the classes of claims on the company’s assets. After the exclusive period expires, the Creditor’s Committee or an individual creditor can themselves propose their own, possibly competing, Restructuring Plan, to the court.
A Restructuring Plan will also be accompanied by a Disclosure Statement, which will contain all the financial information about the bankrupt company’s state of affairs needed for creditors and equity holders to make an informed decision about how to proceed. The court will then hold a hearing to approve the Restructuring Plan and Disclosure Statement before the plan can be voted on by creditors and equity holders. In some cases, these are prepared and negotiated with creditors before bankruptcy is even declared to speed things up and have more favorable terms - a prepackaged bankruptcy.
Once the Restructuring Plan and Disclosure Statement receives court approval, the plan is voted on by the classes of impaired (i.e. debt will not be paid back) creditors to be confirmed. The legal requirement for a bankruptcy court to confirm a Restructuring Plan is to have at least one entire class of impaired creditors vote to accept the plan. A class of creditors is deemed to have accepted a Restructuring Plan when creditors that hold at least 2/3 of the dollar amount and at least half of the number of creditors vote to accept the plan. After another hearing, and listening to any potential objections to the proposed Restructuring Plan, such as other impaired classes that don't like the plan, the court may then confirm the plan, putting it to effect.
This is one potential ending to a Chapter 11 case. A case can also end with a conversion to a Chapter 7 (Liquidation) case, if one of the parties involved file a motion to do so for a cause that is deemed by the courts to be in the best interest of the creditors. In Chapter 7, the company ceases operating and a trustee is appointed to begin liquidating (i.e. selling) the company’s assets. The proceeds from the liquidation process are then paid out to creditors, with the most senior levels of the capital structure being paid out first, and the equity holders are usually left with nothing. Finally, a party can file a motion to dismiss the case for some cause deemed to be in the best interest of the creditors.
The Tale of Two Bankruptcies - WLL and HTZHertz (HTZ) has come into news recently, with the stock surging up to $6, or 1500% off its lows, for no apparent fundamental reason, despite the fact that they’re currently in bankruptcy and their stock is likely worthless. We’ll get around to what might have caused this later, for now, we’ll go over what’s going on with Hertz in its bankruptcy proceedings. To get a clearer picture, let’s start with a stock that I’ve been following since April - Whiting Petroleum (WLL).
WLL is a stock I’ve covered pretty extensively, especially with it’s complete price dislocation between the implied value of the restructured company by their old, currently trading, stock being over 10x the implied value of the bonds, which are entitled to 97% of the new equity. Usually, capital structure arbitrage, a strategy to profit off this spread by going long on bonds and shorting the equity, prevents this, but retail investors have started pumping the stock a few days after WLL’s bankruptcy to “buy the dip” and make a quick buck. Institutions, seeing this irrational behavior, are probably avoiding touching at risk of being blown out by some unpredictable and irrational retail investor pump for no apparent reason. We’re now seeing this exact thing play out a few months later, but at a much larger scale with Hertz.
So, how is WLL's bankruptcy process going? For anyone curious, you can follow the court case in Stretto. Luckily for Whiting, they’ve entered into a prepackaged bankruptcy process and filed their case with a Restructuring Plan already in mind to be able to have existing equity holders receive a mere 3% of new equity to be distributed among them, with creditors receiving 97% of new equity. For the past few months, they’ve quickly gone through all the hearings and motions and now have a hearing to receive approval of the Disclosure Statement scheduled for June 22nd. This hearing has been pushed back a few times, so this may not be the actual date. Another pretty significant document was just filed by the Committee of Creditors on Friday - an objection to the Disclosure Statement’s approval. Among other arguments about omissions and errors the creditor’s found in the Disclosure Statement, the most significant thing here is that Litigation and Rejection Damage claims holders were treated in the same class as a bond holders, and hence would be receiving part of their class’ share of the 97% of new equity. The creditors claim that this was misleading as the Restructuring Plan originally led them to believe that the 97% would be distributed exclusively to bond holders, and the claims for Litigation and Rejection Damage would be paid in full and hence be unimpaired. This objection argues that the debtors did this gerrymandering to prevent the Litigation and Rejection Damage claims be represented as their own class and able to reject the Restructuring Plan, requiring either payment in full of the claims or existing equity holders not receiving 3% of new equity, and be completely wiped out to respect the capital structure. I’d recommend people read this document if they have time because whoever wrote this sounds legitimately salty on behalf of the bond holders; here’s some interesting excerpts:
Moreover, despite the holders of Litigation and Rejection Damage Claims being impaired, existing equity holders will still receive 3% of the reorganized company’s new equity, without having to contribute any new value. The only way for the Debtors to achieve this remarkable outcome was to engage in blatant classification gerrymandering. If the Debtors had classified the Litigation and Rejection Damage Claims separately from the Noteholder claims and the go-forward Trade Claims – as they should have – then presumably that class would reject a plan that provides Litigation and Rejection Damage Claims with a pro rata share of minority equity.
The Debtors have placed the Rejection Damage and Litigation Claims in the same class as Noteholder Claims to achieve a particular result, namely the disenfranchisement of the Rejection Damage and Litigation Claimants who, if separately classified, may likely vote to reject the Plan. In that event, the Debtor would be required to comply with the cramdown requirements, including compliance with the absolute priority rule, which in turn would require payment of those claims in full, or else old equity would not be entitled to receive 3% of the new equity. Without their inclusion in a consenting impaired class, the Debtors cannot give 3% of the reorganized equity to existing equity holders without such holders having to contribute any new value or without paying the holders of Litigation and Rejection Damage Claims in full.
The Committee submits that the Plan was not proposed in good faith. As discussed herein, the Debtors have proposed an unconfirmable Plan – flawed in various important respects. Under the circumstances discussed above, in the Committee’s view, the Debtors will not be able to demonstrate that they acted with “honesty and good intentions” and that the Plan’s results will not be consistent with the Bankruptcy Code’s goal of ratable distribution to creditors.
They’re even trying to have the court stop the debtor from paying the lawyers who wrote the restructuring agreement.
However, as discussed herein, the value and benefit of the Consenting Creditors’ agreements with the Debtors –set forth in the RSA– to the Estates is illusory, and authorizing the payment of the Consenting Creditor Professionals would be tantamount to approving the RSA, something this Court has stated that it refuses to do.20 The RSA -- which has not been approved by the Court, and indeed no such approval has been sought -- is the predicate for a defective Plan that was not proposed in good faith, and that gives existing equity holders an equity stake in the reorganized enterprise even though Litigation and Rejection Damage Creditors will (presumably) not be made whole under the Plan and the existing interest holders will not be contributing requisite new value.
As a disclaimer, I have absolutely zero knowledge nor experience in law, let alone bankruptcy law. However, from reading this document, if what the objection indicates to be true, could mean that we end up having the court force the Restructuring agreement to completely wipe out the current equity holders. Even worse, entering a prepackaged bankruptcy in bad faith, which the objection argues, might be grounds to convert the bankruptcy to Chapter 7; again, I’m no lawyer so I’m not sure if this is true, but this is my best understanding from my research.
So what’s going on with Hertz? Most analysts expect that based on Hertz’s current balance sheet, existing equity holders will most likely be completely wiped out in the restructuring. You can keep track of Hertz’s bankruptcy process here, but it looks like this is going to take a few months, with the first meeting of creditors scheduled for July 1. An interesting 8-K got filed today for HTZ, and it looks like they’re trying to throw a hail Mary for their case by taking advantage of dumb retail investors pumping up their stock. They’ve just been approved by the bankruptcy court to issue and sell up to $1B (double their current market cap) of new shares in the stock market. If they somehow pull this off, they might have enough money raised to dismiss the bankruptcy case and remain in business, or at very least pay off their creditors even more at the expense of Robinhood users.
The Rise of Retail Investors - An UpdateA few weeks ago, I talked about data that suggested a sudden surge in retail investor money flooding the market, based on Google Trends and broker data. Although this wasn’t a big topic back when I wrote about it, it’s now one of the most popular topics in mainstream finance news, like CNBC, since it’s now the only rational explanation for the stock market to have pumped this far, and for bankrupt stocks like HTZ and WLL to have surges far above their pre-bankruptcy prices. Let’s look at some interesting Google Trends that I found that illustrates what retail investors are doing.
Google Trends - Margin Calls
Google Trends - Robinhood
Google Trends - What stock should I buy
Google Trends - How to day trade
Google Trends - Pattern Day Trader
Google Trends - Penny Stock
The conclusion that can be drawn from this data is that in the past two weeks, we are seeing a second wave of new retail investor interest, similar to the first influx we saw in March. In particular, these new retail investors seem to be particularly interested in day trading penny stocks, including bankrupt stocks. In fact, data from Citadel shows that penny stocks have surged on average 80% in the previous week.
Why Retail Investors Matter
A common question that’s usually brought up when retail investors are brought up is how much they really matter. The portfolio size of retail investors are extremely small compared to institutional investors. Anecdotally and historically, retail investors don’t move the market, outside of some select stocks like TSLA and cannabis stocks in the past few years. However when they do, shit gets crazy; the last time retail investors drove the stock market was in the dot com bubble. There’s a few papers that look into this with similar conclusions, I’ll go briefly into this one, which looks at almost 20 years of data to look for correlations between retail investor behavior and stock market movements. The conclusion was that behaviors of individual retail investors tend to be correlated and are not random and independent of each other. The aggregate effect of retail investors can then drive prices of equities far away from fundamentals (bubbles), which risk-averse smart money will then stay away from rather than try taking advantage of the mispricing (i.e. never short a bubble). The movement in the prices are typically short-term, and usually see some sort of reversal back to fundamentals in the long-term, for small (i.e. < $5000) trades. Apparently, the opposite is true for large trades; here’s an excerpt from the paper to explain.
Stocks recently sold by small traders perform poorly (−64 bps per month, t = −5.16), while stocks recently bought by small traders perform well (73 bps per month, t = 5.22). Note this return predictability represents a short-run continuation rather than reversal of returns; stocks with a high weekly proportion of buys perform well both in the week of strong buying and the subsequent week. This runs counter to the well-documented presence of short-term reversals in weekly returns.14,15 Portfolios based on the proportion of buys using large trades yield precisely the opposite result. Stocks bought by large traders perform poorly in the subsequent week (−36 bps per month, t = −3.96), while those sold perform well (42 bps per month, t = 3.57). We find a positive relationship between the weekly proportion of buyers initiated small trades in a stock and contemporaneous returns. Kaniel, Saar, and Titman (forthcoming) find retail investors to be contrarians over one-week horizons, tending to sell more than buy stocks with strong performance. Like us, they find that stocks bought by individual investors one week outperform the subsequent week. They suggest that individual investors profit in the short run by supplying liquidity to institutional investors whose aggressive trades drive prices away from fundamental value and benefiting when prices bounce back. Barber et al. (2005) document that individual investors can earn short term profits by supplying liquidity. This story is consistent with the one-week reversals we see in stocks bought and sold with large trades. Aggressive large purchases may drive prices temporarily too high while aggressive large sells drive them too low both leading to reversals the subsequent week.
Thus, using a one-week time horizon, following the trend can make you tendies for a few days, as long as you don’t play the game for too long, and end up being the bag holder when the music stops.
The Keynesian Beauty ContestThe economic basis for what’s going on in the stock market recently - retail investors driving up stocks, especially bankrupt stocks, past fundamental levels can be explained by the Keynesian Beauty Contest, a concept developed by Keynes himself to help rationalize price movements in the stock market, especially during the 1920s stock market bubble. A quote by him on the topic of this concept, that “the market can remain irrational longer than you can remain solvent”, is possibly the most famous finance quote of all time.
The idea is to imagine a fictional newspaper beauty contest that asks the reader to pick the six most attractive faces of 100 photos, and you win if you pick the most popular face. The naive strategy would be to pick the faces that you think are the most attractive. A smarter strategy is to figure out what the most common public perception of attractiveness would be, and to select based on that. Or better yet, figure out what most people believe is the most common public perception of what’s attractive. You end up having the winners not actually be the faces people think are the prettiest, but the average opinion of what people think the average opinion would be on the prettiest faces. Now, replace pretty faces with fundamental values, and you have the stock market.
What we have today is the extreme of this. We’re seeing a sudden influx of dumb retail money into the market, who don’t know or care about fundamentals, like trading penny stocks, and are buying beaten down stocks (i.e. “buy the dip”). The stocks that best fit all three of these are in fact companies that have just gone bankrupt, like HTZ and WLL. This slowly becomes a self-fulfilling prophecy, as people start seeing bankrupt stocks go up 100% in one day, they stop caring about what stocks have the best fundamentals and instead buy the stocks that people think will shoot up, which are apparently bankrupt stocks. Now, it gets to the point where even if a trader knows a stock is bankrupt, and understands what bankruptcy means, they’ll buy the stock regardless expecting it to skyrocket and hope that they’ll be able to sell the stock at a 100% profit in a few days to an even greater fool. The phenomenon is well known in finance, and it even has a name - The Greater Fool Theory. I wouldn’t be surprised if the next stock to go bankrupt now has their stock price go up 100% the next day because of this.
What is the smart money doing - DIX & GEXAlright that’s enough talk about dumb money. What’s all the smart money (institutions) been doing all this time? For that, you’ll want to look at what’s been going on with dark pools. These are private exchanges for institutions to make trades. Why? Because if you’re about to buy a $1B block of SPY, you’re going to cause a sudden spike in prices on a normal, public exchange, and probably end up paying a much higher cost basis because of it. These off-exchange trades account for about one third of all stock volume. You can then use data of market maker activity in these dark pools to figure out what institutions have been doing, the most notable indicators being DIX by SqueezeMetrics.
Another metric they offer is GEX, or gamma exposure. The idea behind this is that market markets who sell option contracts, typically don’t want to (or can’t legally) take an actual position in the market; they can only provide liquidity. Hence, they have to hedge their exposure from the contracts they wrote by going long or short on the stocks they wrote contracts to. This is called delta-hedging, with delta representing exposure to the movement of a stock. With options, there’s gamma, which represents the change in delta as the stock price moves. So as stock prices move, the market maker needs to re-hedge their positions by buying or selling more shares to remain delta-neutral. GEX is a way to show the total exposure these market makers have to gamma from contracts to predict stock price movements based on what market makers must do to re-hedge their positions.
Now, let’s look at what these indicators have been doing the past week or so.
DIX & GEX
In the graph above, an increasing DIX means that institutions are buying stocks in the S&P500, and an increasing GEX means that market makers have increasing gamma exposure. The DIX whitepaper, it has shown that a high DIX is often correlated with increased near-term returns, and in the GEX whitepaper, it shows that a decreased GEX is correlated with increased volatility due to re-hedging. It looks like from last week’s crash, we had institutions buy the dip and add to their current positions. There was also a sudden drop in GEX, but it looks like it’s quickly recovered, and we’ll see volatility decreased next week. Overall, we’re getting bullish signals from institutional activity.
Bubbles and Market SentimentI’ve long held that the stock market and the economy has been in a decade-long bubble caused by liquidity pumping from the Fed. Recently, the bubble has been accelerated and it’s becoming clearer to people that we are in a bubble. Nevertheless, you shouldn’t short the bubble, but play along with it until it bursts. Bubbles are driven by pure sentiment, and this can be a great contrarian indicator to what stage of the bubble we are in. You want to be a bear when the market is overly greedy and a bull when the market is overly bearish. One of the best tools to measure this is the equity put / call ratio.
Put / Call Ratio
The put/call ratio dropped below 0.4 last week, something that’s almost never happened and has almost always been immediately followed up by a correction - which it did this time as well. A low put / call ratio is usually indicative of an overly-greedy market, and a contrarian indicator that a drop is imminent. However, right after the crash, the put/call ratio absolutely skyrocketed, closing right above 0.71 on Friday, above the mean put / call ratio for the entire rally since March’s lows. In other words, a ton of money has just been poured into SPY puts expecting to profit off of a downtrend. In fact, it’s possible that the Wednesday correction itself has been exasperated by delta hedging from SPY put writers. However, this sudden spike above the mean for put/call ratio is a contrarian indicator that we will now see a continued rally.
TechnicalsMagic Markers on SPY, Daily
With Technical Indicators, there’s a few things to note
My Strategy for Next Week
While technicals are pretty bearish, retail and institutional activity and market sentiment is indicating that the market still continue to rally. My strategy for next week will depend on whether or not the market opens above or below 300. I’m currently mostly holding long volatility positions, that I’ve started existing on Friday.
The Bullish case
If 300 proves to be a strong support level, I’ll start entering bullish positions, following my previous strategy of going long on weak sectors such as airlines, cruises, retail, and financials, once they break above the 24% retracement and exit at the 50% retracement. This is because there’s very little price levels and resistance above 300, so any movements above this level will be very parabolic up to ATHs, as we saw in the beginning of 2020 and again the past two weeks. If SPY moves parabolic, the biggest winners will likely be the weakest stocks since they have the most room to go up, with most of the strongest stocks already near or above their ATHs. During this time, I’ll be rolling over half of my profits to VIX calls of various expiry dates as a hedge, and in anticipation of any sort of rug pull for when this bubble does eventually pop.
The Bearish case
For me to start taking bearish positions, I’ll need to see SPY open below 300, re-test 300 and fail to break above it, proving it to be a resistance level. If this happens, I’ll start entering short positions against SPY to play the price levels. There’s a lot of price levels between 300 and 274, and we’d likely see a lot of consolidation instead of a big crash in this region, similar to the way up through this area. Key levels will be 300, 293, 285, 278, and finally 274, which is the levels I’d be entering and exiting my short positions in.
I’ve also been playing with WLL for the past few months, but that has been a losing trade - I forgot that a market can remain irrational longer than I can remain solvent. I’ll probably keep a small position on WLL puts in anticipation of the court hearing for the disclosure statement, but I’ve sold most of my existing positions.
Live UpdatesAs always, I'll be posting live thoughts related to my personal strategy here for people asking.
6/15 2AM - /ES looking like SPY is going to gap down tomorrow. Unless there's some overnight pump, we'll probably see a trading range of 293-300.
6/15 10AM - Exited any remaining long positions I've had and entered short positions on SPY @ 299.50, stop loss at 301. Bearish case looking like it's going to play out
6/15 10:15AM - Stopped out of 50% of my short positions @ 301. Will stop out of the rest @ 302. Hoping this wasn't a stop loss raid. Also closed out more VIX longer-dated (Sept / Oct) calls.
6/15 Noon - No longer holding any short positions. Gap down today might be a fake out, and 300 is starting to look like solid support again, and 1H MACD is crossing over, with 15M remaining bullish. Starting to slowly add to long positions throughout the day, starting with CCL, since technicals look nice on it. Also profit-took most of my VIX calls that I bought two weeks ago
6/15 2:30PM - Bounced up pretty hard from the 300 support - bull case looks pretty good, especially if today's 1D candle completely engulphs the Friday candle. Also sold another half of my remaining long-dated VIX calls - still holding on to a substantial amount (~10% of portfolio). Will start looking to re-buy them when VIX falls back below 30. Going long on DAL as well
6/15 11:30PM - /ES looking good hovering right above 310 right now. Not many price levels above 300 so it's hard to predict trading ranges since there's no price levels and SPY will just go parabolic above this level. Massive gap between 313 and 317. If /ES is able to get above 313, which is where the momentum is going to right now, we might see a massive gap up and open at 317 again. If it opens below 313, we might see the stock price fade like last week.
6/15 Noon - SPY filled some of the gap, but then broke below 313. 15M MACD is now bearish. We might see gains from today slowly fade, but hard to predict this since we don't have strong price levels. Will buy more longs near EOD if this happens. Still believe we'll be overall bullish this week. GE is looking good.
6/16 2PM - Getting worried about 313 acting as a solid resistance; we'll either probably gap up past it to 317 tomorrow, or we might go all the way back down to 300. Considering taking profit for some of my calls right now, since you'll usually want to sell into resistance. I might alternatively buy some 0DTE SPY puts as a hedge against my long positions. Will decide by 3:30 depending on what momentum looks like
6/16 3PM - Got some 1DTE SPY puts as a hedge against my long positions. We're either headed to 317 tomorrow or go down as low as 300. Going to not take the risk because I'm unsure which one it'll be. Also profit-took 25% of my long positions. Definitely seeing the 313 + gains fade scenario I mentioned yesterday
6/17 1:30AM - /ES still flat struggling to break through 213. If we don't break through by tomorrow I might sell all my longs. Norwegian announced some bad news AH about cancelling Sept cruises. If we move below $18.20 I'll probably sell all my remaining positions; luckily I took profit on CCL today so if options do go to shit, it'll be a relatively small loss or even small gain.
6/17 9:45AM - SPY not being able to break through 313/314 (79% retracement) is scaring me. Sold all my longs, and now sitting on cash. Not confident enough that we're actually going back down to 300, but no longer confident enough on the bullish story if we can't break 313 to hold positions
6/17 1PM - Holding cash and long-term VIX calls now. Some interesting things I've noticed
6/17 3:50PM - SPY 15M MACD is now very bearish, and 1H is about to crossover. I'd give it a 50% chance we'll see it dump tomorrow, possibly towards 300 again. Entered into a very small position on NTM SPY puts, expiring Friday
6/18 10AM - 1H MACD is about to crossover. Unless we see a pump in the next hour or so, medium-term momentum will be bearish and we might see a dump later today or tomorrow.
6/18 12PM - Every MACD from 5M to 1D is now bearish, making me believe we'd even more likely see a drop today or tomorrow to 300. Bought short-dates June VIX calls. Stop loss for this and SPY puts @ 314 and 315
6/18 2PM - Something worth noting: opex is tomorrow and max pain is 310, which is the level we're gravitating towards right now. Also quad witching, so should expect some big market movements tomorrow as well. Might consider rolling my SPY puts forward 1 week since theoretically, this should cause us to gravitate towards 310 until 3PM on Friday.
6/18 3PM - Rolled my SPY puts forward 1W in case theory about max pain + quad witching end up having it's theoretical effect. Also GEX is really high coming towards options expiry tomorrow, meaning any significant price movements will be damped by MM hedging. Might not see significant price movements until quad witching hour tomorrow 3PM
6/18 10PM - DIX is very high right now, at 51%, which is very bullish. put/call ratio is still very low though. Very mixed signals. Will be holding positions until Monday or SPY 317 before reconsidering them.
6/18 2PM - No position changes. Coming into witching hour we're seeing increased volatility towards the downside. Looking good so far
As each person’s definition of what “Ethical” means differ and there is no black-and-white definition of “ethical”, it is important to understand that some trade-offs have to be made.submitted by SirBanterClaus to UKEthicalInvesting [link] [comments]
In this Ethical/SRI Criteria Series, we take a look at some of the most popular Responsible Investment (e.g. Ethical, ESG, Sustainable, Impact Investing) funds and their "Ethical" investment criteria to help you make better fund selections to align with your own values.
L&G Future World ESG Developed Index Fund
The Future World funds are for investors who want to express a conviction on environmental, social and governance (ESG) themes. The funds extend LGIM’s approach to sustainable investing across a broad array of asset classes and strategies.
Future World is a natural evolution of what Legal & General Investment Management (LGIM) has always done – it reflects its culture and is aligned with its investor clients’ values. It seeks to identify long-term themes and opportunities, while managing the risks of a changing world.
Investors are increasingly recognising that ESG factors play a crucial role in determining asset prices, and helping to identify the companies that will succeed in a rapidly changing world – the winners of the future. As a result, sustainable investing is very much here to stay.
Hence the Future World Fund range helping to bring investments that incorporate ESG principles into the mainstream. The fund range include:
The objective of the Fund is to provide a combination of growth and income by tracking the performance of the Solactive L&G Enhanced ESG Developed Index (the “Benchmark Index”).
LGIM's approach rests on three pillars: long-term thematic analysis, the integration of ESG considerations and active ownership.
It believes that well-managed companies are more likely to deliver sustainable long-term returns. Assessing companies on their management of environmental, social and governance (ESG) issues is an important element of risk management, and therefore part of investors’ fiduciary duty.
Companies are intrinsically linked to the economies and societies in which they operate. Investors are collective owners of companies and LGIM therefore believes that it has a responsibility to the market as a whole. By incorporating ESG factors into investment decisions, LGIM believes investors can gain an element of protection against future risks and the potential for better long-term financial outcomes.
Future World "Protection List" (Negative Screening)
Through the Future World fund range companies are incentivised to operate more sustainably allowing clients to go further in integrating ESG factors into their investment strategy.
Companies are incorporated into the Protection List if they fail to meet minimum standards of globally accepted business practices. Across the LGIM-designed Future World funds, securities issued by such companies will not be held or exposure to them will be significantly reduced. The Future World Protection List includes companies which meet any of the following criteria:
There are a number of international conventions and treaties that have been developed with a view to prohibiting or limiting the use and availability of these weapons. The manufacture or production of such weapons is illegal in a number of jurisdictions globally and the involvement of companies in such weapons brings reputational risk and censure.
LGIM uses data for the identification of companies involved in the manufacture or production of controversial weapons provided by a well-known and highly respected ESG data provider.
Companies that are involved in the manufacture or production of cluster munitions, antipersonnel landmines, and biological and chemical weapons will be incorporated into the Future World Protection List. Companies incorporated into the list are involved in the core weapons system or components or services of the core weapons system considered to be tailor-made and essential for the lethal use of the weapon. Additionally, if companies are involved in the production, maintenance/service, sale/trade or research and development in relation to the core weapons system, they will also be incorporated into the list.
LGIM uses data for the identification of companies in breach of the principles provided by a well-known and highly respected ESG data provider.
Companies that are in breach of at least one of the UNGC principles for a continuous period of three years (36 months) or more will be considered to be persistent violators of the UNGC principles and incorporated into the list.
LGIM uses data for the identification of pure play coal companies provided by a well-known and highly respected ESG data provider.
Companies which derive a significant proportion of their revenues from the mining of bituminous or lignite coal, development of mining sites for bituminous or lignite coal, or the processing of bituminous or lignite coal are considered to be pure coal companies and will be incorporated into the Future World Protection List.
LGIM ESG Scoring (28 metrics) & Tilted indices
LGIM uses a proprietary ESG scoring methodology based on 28 metrics to score and monitor companies, across Environmental, Social and Governance factors, plus an extra Transparency factor - see below. It uses these scores to design ESG-aware tilted indices which invest more in those companies with higher scores and less in those which score lower, while retaining the investment profile of a mainstream index. The ESG Score is aligned to LGIM's engagement and voting activities.
28 Key Metrics used to calculate ESG Score
1. Carbon emissions intensity
LGIM considers the carbon dioxide emissions that a company produces directly (‘Scope 1’) or is indirectly responsible for through its purchased energy (‘Scope 2’). The sum of these emissions is divided by the companies’ revenue. This provides a measure of the carbon emissions intensity of a company’s activities, adjusted by company size and applicable across different sectors. Data on indirect emissions from companies’ supply chain and use of sold products (‘Scope 3’) is not used.
Companies whose carbon emissions intensity is less than the global median will receive a higher score, whereas companies with more carbon-intensive activities will receive a lower score. Carbon emissions data is provided by Trucost.
2. Carbon reserve intensity
Carbon reserves are reserves of fossil fuels (oil, coal and gas). Companies owning such reserves present investors with two long-term risks. First, if all known fossil fuel reserves were burnt, the associated carbon emissions would lead to a dramatic rise in global temperatures and extreme weather events. This would cause unprecedented disruption for companies’ operations and supply chains, in addition to the significant human costs from forced migration, water stress and pressures on global food supply. The second risk, which is partly a reaction to the first, is that the value of fossil fuel assets may significantly reduce, due to the ongoing energy transition accelerated by policy and technological trends.
Companies with very large fossil fuel reserves or with very carbon-intensive reserves (e.g. coal, tar sands) are more at risk from this change.
This metric looks at the embedded carbon in the fossil fuel reserves owned by a company, divided by a company’s market capitalisation, to adjust for company size. This represents a carbon reserves intensity score for a company. Carbon reserves data is provided by Trucost.
3. Green revenues
The transition to a low-carbon economy presents investment opportunities. New technologies are already leading to new revenue streams in sectors from agriculture to infrastructure and energy, with further innovation anticipated as the world develops alternatives to our current approach to energy and natural resources.
Companies who derive revenues from low-carbon services and technologies are assigned a green revenue score, in proportion to the percentage of company revenue derived from ‘green’ activities. This is applied as a positive uplift to the companies’ score.
Companies that may have a lower score due to their exposure to carbon emissions are rewarded if they have revenue exposures to green sources. This is intended to encourage companies to drive innovation and provide solutions to the energy transition.
LGIM follows its data provider’s classification of green revenue streams, but exclude carbon trading, gas- and nuclear-related activities.
Currently, many companies’ disclosures are not sufficiently granular enough to identify green revenue streams. LGIM encourages companies to improve disclosures in this area.
Green revenues data is provided by HSBC.
Themes: Social Diversity and Human Capital
Social Diversity: LGIM believes that companies that are representative of their employees and society, which bring together a diversity of views, backgrounds, values and perspectives, have a better track record of innovation, decision-making and culture.
Having diverse companies also has macroeconomic benefits, as all talent within an economy is effectively utilised.
Gender has been chosen as a proxy for social diversity within a company. Data on gender is globally reported, provides an easily measured way to review total workforce and management levels, and can also serve as an indicator for a company’s overall approach, as companies with strong approaches to gender diversity are also likely to have a commitment to other types of diversity.
LGIM recognises that some companies and sectors face challenges in attracting a diverse group of employees. Therefore, by looking at diversity across the different levels within a company, we seek to capture the development of a pipeline of talent. The social diversity theme tracks four indicators, looking at the percentage of:
4. Women on the board
5. Women at executive level
6. Women in management
7. Women in workforce
Across all four indicators, LGIM considers 30% gender diversity as a minimum standard, with companies below this threshold receiving negative scores. LGIM believes this represents a turning point within organisations, creating a critical mass that can influence change and impact the culture and practices of companies.
Having diversity across the workforce is important for the culture of the organisation and an indicator of the future talent pipeline for management. However, LGIM ESG scores that in most sectors and regions, gender representation is higher in the general workforce than it is at more senior levels.
Social diversity data is provided by Refinitiv.
Human Capital - Policy & Incidents: People are the most important assets for any company. Attracting and retaining the best talent, motivating them to be innovative, efficient and committed to the goal of the company is key for future success. A number of indicators can allow investors to get a sense of how companies manage the risks and opportunities associated with their workforce. LGIM has chosen to use the strength of companies’ social policies, checked against social incident rates, as proxies for how companies value, respect and support their employees and workforce, and how they promote a healthy and engaging work culture.
LGIM utilises four human capital indicators to capture whether companies have sufficient policies in place with regards to below. Across each policy category, companies who are deemed to have no formal policies in place receive a negative score. Companies with a formal policy in place receive a neutral score. Finally, companies with adequate to strong policies receive positive scores.
8. Bribery and corruption policy
Occurrences of bribery and corruption can indicate issues related to culture and employees; LGIM looks for reassurance that companies are managing these risks by implementing appropriate policies.
9. Freedom of association policy
The ability of employees to freely form and join unions is a key component of a healthy work culture.
10. Discrimination policy
Attracting and supporting a diverse and inclusive workplace is critical to creating a working culture with diversity of thought to support decision-making. A strong policy against discrimination is a key element to achieving this objective.
11. Supply chain policy
The strength of the supply chain is critical for most companies and it is a crucial component of applying consistent social standards across the businesses globally. LGIM expects companies to have strong policies for their supplier relationships.
LGIM also incorporate incidents into this theme, as a high level of material incidents may indicate that current policies are either of poor quality or insufficiently enforced. As such, it considers:
12. Employee incidents
13. Business ethics incidents
14. Supply chain incidents
A penalty is applied to companies’ Human Capital policy score depending on the severity of the incident.
All human capital indicators are provided by Sustainalytics.
Themes: Investor rights, board composition and audit quality
Board composition - The board of directors is the primary structure setting corporate strategy and direction, overseeing management’s performance and approving the use of investor capital. Having the right composition at the top of a company is an essential element of its success. Maintaining strong corporate governance through a high quality and independent board dilutes the risk of power being concentrated in one or a few people in an organisation and ensures there are appropriate levels of accountability.
This theme is composed of data on three indicators:
15. Independence of the chair
The chair leads the board, setting agendas for the discussion and ensuring the board has the right people and the right information required to make the best decisions and hold management accountable. As set out in our global voting policy, LGIM therefore expect the chair to be independent upon appointment and throughout their tenure. LGIM assesses whether the chair is currently an executive or has been a former executive of the company. A high score is attributed to an independent chair.
16. Independent directors on the board
An independent board is critical in overseeing the management and capital of a company. LGIM acknowledges that the structure of boards varies between companies and countries. As set out in LGIM's global voting policy, it believes that having a minimum of at least 30% independent directors is an essential safeguard for minority shareholders. Companies that fall below this threshold are penalised, whilst companies with a majority of independent directors are rewarded with top scores.
17. Board tenure
Regular refreshment of the board contributes to a continued independent board with the relevant skillsets. Regular refreshment can also assist in questioning established best practices and avoid ‘group think’. However, LGIM equally recognises the value of retaining corporate knowledge within a board, therefore do not wish to see too frequent change. LGIM's methodology reflects its global voting policy in that a lower score is attributed to boards with very high or very low board tenure.
Audit oversight - Having accurate and reliable financial information is the bedrock of investment decision-making and effective corporate governance.
Investors expect companies to demonstrate and explain the established processes and procedures to ensure the independence and robustness of the internal and external audit functions, and the level of oversight from the board.
18. Audit committee expertise
The audit committee plays a vital role in safeguarding investors’ interests. LGIM expects all companies to have at least three independent members on the audit committee, including a “financial expert” as defined by the US Securities and Exchange Commission’s rules following the Sarbanes-Oxley Act. Companies who fail to meet this minimum standard are penalised.
19. Non-audit fees paid to auditors
The extent to which auditors conduct non-audit work (i.e. consulting, IT support, etc.) for an audit client is an important proxy for independence.
Auditors should not audit their own work, and the higher margins available on the non-audit work may affect their willingness to negatively mark the accounts. LGIM does not expect excessive non-audit work to be conducted by the company’s external auditors, as this will bring into question the independence of their judgment. In line with LGIM's global voting policy, the scoring methodology penalises companies when non-audit fees exceed 50% of the companies’ audit-related fees.
20. Audit opinion of the accounts
An auditor’s opinion provides a view into the extent to which a company’s financial statements represent a "true and fair" view of a company's financial performance and position. From a score perspective, LGIM only assumes that a company is compliant when the opinion is “unqualified” (i.e. a company’s financial statements are fairly and appropriately presented, without any exceptions, and in compliance with accounting standards). All other auditor opinions result in a negative score.
Investor rights - The ability of shareholders to vote is an important mechanism in the public equity markets, to demonstrate dissent and align the interests of the company and management to that of the owners. In contrast, a diminished ability to hold corporates to account weakens fundamental checks and balances.
Investor rights are therefore assessed based on two data points:
21. Free float
The greater the number of shares held by disbursed shareholders (free float), the greater the opportunities for shareholders to use their voice for influence and impact. LGIM encourages companies to have a free-float of at least 50%.
22. Equal voting rights
LGIM subscribes to the principle of ‘one share, one vote’, as control of a company should be proportional to the risk being borne by investors. LGIM believes this is both a fundamental right of shareholders and an essential feature of good corporate governance. Without it, investors lack the ability to influence the companies they own and have a say in how their capital is being used.
Companies are tested against three criteria:
In addition to the traditional E, S and G metrics, LGIM also assesses companies on their overall transparency. Without access to comprehensive corporate data, investors are unable to properly assess material risks and opportunities related to their investments.
23. ESG reporting standard
Analysing the company's overall reporting on ESG matters and the extent to which it conforms to international standards as well as best practices.
24. Verification of ESG reporting standards
Assessing whether the company’s sustainability report has been externally verified according to a report assurance standard.
25. Carbon Disclosure Project (CDP) disclosure
Responding to relevant CDP questionnaires is an established best practice in carbon emissions reporting
26. Tax disclosure
Assessing whether the company reports taxes paid in each country of operation. The best score requires full country-by-country reporting, a moderate score is given for when some but not all taxes are disclosed, whilst a low score indicates that tax disclosure is happening in only a few or none of the countries of operation.
27. Director disclosure
Assessing the level of disclosure regarding board directors, including directors’ biographies. This information is critical for investors in order to assess the skillsets and relevant experience of director nominees and the overall quality of the board of directors.
28. Remuneration disclosure
Disclosure of executive pay policy and practices is critical to allow proper analysis of the alignment between pay and performance and to ensure that the quantum of pay is both reasonable and within market standards.
Score calculation - Each of the 28 data points are assessed and scored, creating a sub-score at the theme level.
Individual themes are then aggregated to form the environmental, social, governance and transparency scores.
Companies’ final ESG scores are presented between 0 and 100. A high-scoring company will have met most of our criteria for best practice; a company scoring 0 has not met any of LGIM's minimum expectations and represents a very significant concern.
Scores are updated twice a year in March and September.
LGIM's Global ESG Scores of companies - March 2020 can be found here
LGIM's objective is to effect positive change in the companies and assets in which it invests, and for society as a whole. In 2019, LGIM focused on:
Future World Funds: Climate Impact Pledge
As one of the largest asset managers in Europe, LGIM seeks to use its scale to ensure companies are playing their part to accelerate the transition to a low-carbon economy. The investment risks surrounding climate change have become so urgent that, for the first time, LGIM is going beyond solely engaging with companies in order to hold them to account on the issue.
In December 2015, 195 governments agreed in Paris to limit the increase in the average global temperature to well below 2°C above pre-industrial levels. The Climate Impact Pledge represents LGIM's commitment to address climate change by engaging directly with the largest companies in the world, which are crucial to meeting the 2°C Paris target. The companies will be assessed rigorously for the robustness of their strategies, governance and transparency.
Companies that fail to meet its minimum standards (ESG Scoring) will be removed from, or not invested in, our range of Future World funds, subject to the disinvestment process. In all other funds where LGIM cannot divest, it will vote against reappointing the chair of their board of directors, to ensure LGIM are using one voice across all of our holdings.
The companies covered by the pledge include market leaders in sectors ranging from resource mining to finance. LGIM's assessment takes into account whether they have a corporate statement that formally recognises the impact of climate change; whether they are fully transparent on their carbon contribution; how climate considerations are embedded within the corporate strategy; and whether the board composition is diverse and robust enough to drive innovation and change. LGIM will rank companies based on these criteria, and engage directly with them to improve their rankings. LGIM will also make public the names of some of the best and worst performers, alongside examples of best practices that LGIM would like to see adopted more widely.
Disinvestment Process - If companies fail to meet these criteria, and if after a period of engagement, the company has not addressed the areas of concern, LGIM will either not invest or exclude the company from active Future World funds ("Protection List"), and reduce or divest the company from Future World index funds.
In the Future World index funds, LGIM will make sure the impact of divestment is no more than the tracking error disclosed in the fund’s prospectus. That could mean it will have to retain some investment in companies that do not meet its criteria in order to avoid tracking error. LGIM believes this combined approach of ranking, publicising, voting and divestment can send a powerful message to all companies that their investors are serious about tackling climate change.
Summary: LGIM's proprietary ESG Scoring using 28 key metrics of Global Companies is very impressive to see - it ensures that this is done in-house and not reliant on third-parties, hence it is more transparent and can be amended to match evolving views. I've taken the opportunity to use these ESG Scores and match them up with the L&G Future World ESG Developed Index fund's top 10 holdings below.
In addition, the width and depth of the metrics encompasses many important factors, and the fund would effectively penalise those firms with low ESG scores by tilting exposure to those with higher ESG scores. Though there's a lot of detail, I'm surprised that what's missing is the weightings between the environmental, social, governance and transparency factors (i.e. is each factor weighted equally or is E more important than say T?).
In addition to this, there is a Negative Screening overlay ("Protection List") and Active Voting/Engagement to compliment the process. For a low-cost passive/index tracking fund, this is all very good to see (and quite rare as most simply have a negative screen) and would certainly please those cost-conscious responsible investors.
Having said that, the fund size is still relatively small and the fund lacks a long track record - though this may not be a big concern for an index tracking fund.
Fund Size: £126.8m as at 31/05/2020
Number of Holdings: 1292
OCF: 0.25% as at 30/09/2019
Target benchmark: Solactive L&G Enhanced ESG Developed Index
Top 10 Holdings & LGIM ESG Scores
TL;DR: $UA is taking on a lot of debt because of historically low retail sales causing near bankruptcy cash flow. Largest athletic apparel retailer or not, when the business isn't making money it's losing it. Taking on LARGE amount of debt, to raise cash, to keep the doors open is not the nail in the coffin, but it is damn near close. ER this Friday 7/31 could be a historic miss and future projections, margins, growth and competition will cause a sell off.submitted by Miccodaddy to wallstreetbets [link] [comments]
Super BEAR: 7/31 $8.50-$9 Puts
Conservative BEAR: 8/14 $7.50-$8 Puts
To Bearish Autists,Alright retards, this DD is not done by a professional CFA, CPA or single employee LLC day trading firm. I'm a college grad, with a BS in Chemistry, and i'm 100% self taught on trading for the last 5 years. It's a hobby that pays for other hobbies, not a job and definitely not a thing i do without being informed. That being said heres my hypothesis.
$UA Has StruggledThis is no secret as many of us have brand name recognition of $UA and many of us own it. We know its not Nike and it's a step above Champions and other retail store brands, but it is simply the cost efficient/value brand for people that want quality and but aren't willing to pay Nike prices or get chafed nipples from the $WMT brand. It's become the largest athletic apparel brand in the US, with growth potential in China, signing one of the NBAs biggest star Steph Curry.
Heres the problem, the company is facing increased competition and Covid may of burned down the house when they closed retailers. $UA helped prove there is a middle ground between $NKE and $WMT in quality and price, but they failed to build beyond that, and now $AMZN and other other brands have saturated the market. When i need workout clothes, i look online, a small part of $UA business model. I look for value, and although i'm not buying Nike i'm not buying $UA either. There are tons of other brands that provide the same quality cheaper, and i don't care about brand at they gym, just comfort. $UA failed to build a signature style, they got Steph Curry, but i never hear a 24 year old sneaker head dying over their new pair of shoes. They failed to push online channels of distribution, "have you been to their website?", and some compare their pandemic model to $LULU but they are completely different brands by quality, price and consumer segment.
The companies lack of success could be bad marketing, they have the largest athletic apparel market share, but they can't turn a decent YOY earnings report. So it comes down to poor financial management and high levels of competition driving lower margins. In 2016 $UA was nearly $50/share and its lost billions YOY. Now it's facing an unpredictable pandemic, and record low revenue on a house of debt.
Important Factors for ER
Liabilities: $3.387 Billion (Q1 2020)
Assets: $1.550 Billion (Q1 2020)
Cash is KING and $UA is in desperate need of it with a recent convertible note offering that raised over $400 million dollars. I'm not a finance expert, but here's a snippet that explains the liquidity crunch.
As of March 31, Under Armour had just $959 million in cash. Now, it recently raised another $460 million or so in a convertible note, so its total liquidity is about $1.41 billion. But if it burns through $400 million over the next two quarters, the balance would fall to $600 million or so.Simply put they need to be frugal and cut cost to prevent bankruptcy. this is shown further in the last two weeks when $UA announced they will sell their running/social app, MyFitnessPal. They also sought to break a sponsorship deal with UCLA to conserve cash (nearly $20mil/year).
The price tag for MyFitnessPal in 2015 was $425million, i don’t think $UA will have a easy time getting anyone to buy it, much less gain on the investment. Also the sponsorship deal isn’t broken, yet, and if they do it may come with a huge monetary penalty....exactly what they want to avoid.
This weeks earnings report will announce a huge amount of new liabilities along with massive reductions in revenue expectations. This is the most important part of the ER this week.
China is a very interesting component in the American economic and political world. They are a huge market, but politically they are neither our ally nor our foe. India will give us the same problem in 10-15 years. With increased tensions between DC and Beijing the risk of tariffs and american companies suffering are on the rise, especially retail and manufacturing.
However, China presents a huge growth opportunity to whichever lucky retailers and brands can bribe the right officials and not get caught. $UA is one of those lucky companies, but they are competing in a tough sector. Nike, Adidas, New Balance, a zillion new brands that nobody has heard of and of course knock offs. I lived in Shanghai for a year in college, and theirs “Fake mall” everywhere selling the new Jorban’s and Rolex’s and of course $UA and the Chinese government will never stop it because they don’t practice fair trade practices, at least correctly.
30% of revenue for $UA is international business including several asian and european countries and Australia. China could eventually be more of a cash cow than the US for $UA.
The international opportunity is real, but $UA may never see the light at the end of the tunnel due to this dark period of financial ruins and a competitive marketplace.
Revenue: $536mil (Near miss)
Revenue is key, but the Cash flow and added liabilities will be the dagger.
A LITTLE TA & CHART PRICE ACTION6 month Daily candle
The price of $UA has been hovering around $6.40 & $10.60 for nearly 5 months. $UA has found a solid support at $8.25 and has an upward channel trend, and this has been a very slow recovery relative to other retail brands.
RSI is inching toward overbought. MACD is unsure of the last two months progression and is looking to swing one way or the other after the ER, my bet is down. i expect that $UA will continue on trend nearing $10.60, if the stock price does not fall below the three day trend line(Lilac) then i will wait until thursday afternoon to buy the Puts for the morning ER Call. IF it falls below the lilac line before thursday afternoon i expect my downward channel to be correct and i purchase puts immediately.
Still pondering my strategy for entry and optimizing the return, between there two option ideas.
Super BEAR: 7/31 $9-$9.50
Conservative BEAR: 8/14 $7.50-$8 Puts
$UA has a great value product. It has not done a good job financially due to massive oversight in fiscal management, not creating a better direct to consumer interface, and not being competitive enough in a market with stagnant margins and retail competition that can undercut and or be more popular than the other with celebrities and fashion. $UA is not $LULU, and its drowning in debt with no end in sight. Their model has failed, and their leadership has failed. I suspect retail traders who know $UA by name recognition are propping this up, not understanding their in trouble. As soon as institutional money abandons so will the pocket investors, not to poke fun at you retards.
But hey, i may just be a fucking retard.
P.S. - IF $UA goes under, or is bought out, which athletic apparel company gains the most? My guess is $NKE (long) or $AMZN.
Edit: 7/27 today the SEC notified $UA that they will enforce action against the company for accounting practices seen as fraudulent in 2016 and 2017. It keeps getting worse.
Edit: 7/30 today will most likely be the best opportunity to get cheap 10-20% OTM puts for Friday’s earning call. The stock is shrugged off SEC notices to top executives and a gloomy prediction for earnings. But the market isn’t rational right now, if it ever is, and the stock is looking to squeeze out of its channel past $10.60, and people will take profit before the crash after ER.
Edit: 7/30 AH. 2500 shares pushed the stock up nearly 4%...still expecting big downward projection come morning. Bought 8/14 $8.50 puts this AM.
Edit: 7/30 AH. 10,000 volume pushed the stock up 10% when it moves 1-2% on 5-7 million volume days. I smell stock manipulation by an insider who want to distract from the ER.
Result: AH high of $12.80 and down to $10.25 pre market, I didn’t expect price action to play such a large role in this ER.
Final: watching for 8/14 $8 put, won’t hold till expire most likely. AH/PM on 7/31 was wild and ruined the lotto for 7/31. I’m convinced it was manipulated, why else would a stock increase 25% AH before earnings and drop 27% thereafter from the AH high...in the first hour of trading...they wanted the stock to have buffer and show a new price action target/action...should of dropped below $9 but $9.49 from $12.80 high at least validates my opinion to some degree. $9.31 new support for monday, may blow past support channel at $8.90 and then drop to $8.20 soon after. OR there could be a retracement to the idiotic $12.81. All in all Lost 1% of my account on a yolo, truly retarded.
1min candles - Note AH pump...
What is a complementary currency? It is a form of money that can be used alongside regular money.
What is the fundamental goal of this proposal? The two most fundamental goals motivating this proposal are to insulate local human subsistence and livelihood from the vicissitudes of national and international economic cycles and financial speculation, and to provide tangible and attractive incentives for people to live and consume more sustainably. It also seeks to provide authorities with a means to employ social security expenditures to channel consumption in sustainable directions and encourage economic diversity and community resilience at the local level.
Why should the state administrate the reform? The nation is currently the most encompassing political entity capable of administrating an economic reform of this nature. Ideally it is also subservient to the democratic decisions of its population. The current proposal is envisaged as an option for European nations, but would seem equally advantageous for countries anywhere. If successfully implemented within a particular nation or set of nations, the system can be expected to be emulated by others. Whereas earlier experiments with alternative currencies have generally been local, bottom-up initiatives, a state-supported program offers advantages for long-term success. Rather than an informal, marginal movement connected to particular identities and transient social networks, persisting only as long as the enthusiasm of its founders, the complementary currency advocated here is formalized, efficacious, and lastingly fundamental to everyone's economy.
How is local use defined and monitored? The complementary currency (CC) can only be used to purchase goods and services that are produced within a given geographical radius of the point of purchase. This radius can be defined in terms of kilometers of transport, and it can vary between different nations and regions depending on circumstances. A fairly simple way of distinguishing local from non-local commodities would be to label them according to transport distance, much as is currently done regarding, for instance, organic production methods or "fair trade." Such transport certification would of course imply different labelling in different locales.
How is the complementary currency distributed? A practical way of organizing distribution would be to provide each citizen with a plastic card which is electronically charged each month with the sum of CC allotted to him or her.
Who are included in the category of citizens? A monthly CC is provided to all inhabitants of a nation who have received official residence permits.
What does basic income mean? Basic income is distributed without any requirements or duties to be fulfilled by the recipients. The sum of CC paid to an individual each month can be determined in relation to the currency's purchasing power and to the individual's age. The guiding principle should be that the sum provided to each adult should be sufficient to enable basic existence, and that the sum provided for each child should correspond to the additional household expenses it represents.
Why would people want to use their CC rather than regular money? As the sum of CC provided each month would correspond to purchases representing a claim on his or her regular budget, the basic income would liberate a part of each person's regular income and thus amount to substantial purchasing power, albeit restricted only to local purchases. The basic income in CC would reduce a person's dependence on wage labor and the risks currently associated with unemployment. It would encourage social cooperation and a vitalization of community.
Why would businesses want to accept payment in CC? Business entrepreneurs can be expected to respond rapidly to the radically expanded demand for local products and services, which would provide opportunities for a diverse range of local niche markets. Whether they receive all or only a part of their income in the form of CC, they can choose to use some of it to purchase tax-free local labor or other inputs, and to request to have some of it converted by the authorities to regular currency (see next point).
How is conversion of CC into regular currency organized? Entrepreneurs would be granted the right to convert some of their CC into regular currency at exchange rates set by the authorities.The exchange rate between the two currencies can be calibrated so as to compensate the authorities for loss of tax revenue and to balance the in- and outflows of CC to the state. The rate would thus amount to a tool for determining the extent to which the CC is recirculated in the local economy, or returned to the state. This is important in order to avoid inflation in the CC sector.
Would there be interest on sums of CC owned or loaned? There would be no interest accruing on a sum of CC, whether a surplus accumulating in an account or a loan extended.
How would saving and loaning of CC be organized? The formal granting of credit in CC would be managed by state authorities and follow the principle of full reserve banking, so that quantities of CC loaned would never exceed the quantities saved by the population as a whole.
Would the circulation of CC be subjected to taxation? No.
Why would authorities want to encourage tax-free local economies? Given the beneficial social and ecological consequences of this reform, it is assumed that nation states will represent the general interests of their electorates and thus promote it. Particularly in a situation with rising fiscal deficits, unemployment, health care, and social security expenditures, the proposed reform would alleviate financial pressure on governments. It would also reduce the rising costs of transport infrastructure, environmental protection, carbon offsetting, and climate change adaptation. In short, the rising costs and diminishing returns on current strategies for economic growth can be expected to encourage politicians to consider proposals such as this, as a means of avoiding escalating debt or even bankruptcy.
How would the state's expenditures in CC be financed? As suggested above, much of these expenditures would be balanced by the reduced costs for social security, health care, transport infrastructure, environmental protection, carbon offsetting, and climate change adaptation. As these savings may take time to materialize, however, states can choose to make a proportion of their social security payments (pensions, unemployment insurance, family allowance, etc.) in the form of CC. As between a third and half of some nations' annual budgets are committed to social security, this represents a significant option for financing the reform, requiring no corresponding tax levies.
What are the differences between this CC and the many experiments with local currencies? This proposal should not be confused with the notion, or with the practical operation, of local currencies, as it does not imply different currencies in different locales but one national,complementary currency for local use. Nor is it locally initiated and promoted in opposition to theregular currency, but centrally endorsed and administrated as an accepted complement to it. Most importantly, the alternative currency can only be used to purchase products and services originating from within a given geographical range, a restriction which is not implemented in experiments with Local Exchange Trading Systems (LETS). Finally, the CC is provided as a basic income to all residents of a nation, rather than only earned in proportion to the extent to which a person has made him- or herself useful in the local economy.
What would the ecological benefits be? The reform would radically reduce the demand for long-distance transport, the production of greenhouse gas emissions, consumption of energy and materials, and losses of foodstuffs through overproduction, storage, and transport. It would increase recycling of nutrients and packaging materials, which means decreasing leakage of nutrients and less garbage. It would reduce agricultural intensification, increase biodiversity, and decrease ecological degradation and vulnerability.
What would the societal benefits be? The reform would increase local cooperation, decrease social marginalization and addiction problems, provide more physical exercise, improve psycho-social and physical health, and increase food security and general community resilience. It would decrease the number of traffic accidents, provide fresher and healthier food with less preservatives, and improved contact between producers and consumers.
What would the long-term consequences be for the economy? The reform would no doubt generate radical transformations of the economy, as is precisely the intention. There would be a significant shift of dominance from transnational corporations founded on financial speculation and trade in industrially produced foodstuffs, fuels, and other internationally transported goods to locally diverse producers and services geared to sustainable livelihoods. This would be a democratic consequence of consumer power, rather than of legislation. Through a relatively simple transformation of the conditions for market rationality, governments can encourage new and more sustainable patterns of consumer behavior. In contrast to much of the drastic and often traumatic economic change of the past two centuries, these changes would be democratic and sustainable and would improve local and national resilience.
Why should society want to encourage people to refrain from formal employment? It is increasingly recognized that full or high employment cannot be a goal in itself, particularly if it implies escalating environmental degradation and energy and material throughput. Well-founded calls are thus currently made for degrowth, i.e. a reduction in the rate of production of goods and services that are conventionally quantified by economists as constitutive of GDP. Whether formal unemployment is the result of financial decline, technological development, or intentional policy for sustainability, no modern nation can be expected to leave its citizens economically unsupported. To subsist on basic income is undoubtedly more edifying than receiving unemployment insurance; the CC system encourages useful community cooperation and creative activities rather than destructive behavior that may damage a person's health.
Why should people receive an income without working? As observed above, modern nations will provide for their citizens whether they are formally employed or not. The incentive to find employment should ideally not be propelled only by economic imperatives, but more by the desire to maintain a given identity and to contribute creatively to society. Personal liberty would be enhanced by a reform which makes it possible for people to choose to spend (some of) their time on creative activities that are not remunerated on the formal market, and to accept the tradeoff implied by a somewhat lower economic standard. People can also be expected to devote a greater proportion of their time to community cooperation, earning additional CC, which means that they will contribute more to society – and experience less marginalization – than the currently unemployed.
Would savings in CC be inheritable? No.
How would transport distances of products and services be controlled? It is reasonable to expect the authorities to establish a special agency for monitoring and controlling transport distances. It seems unlikely that entrepreneurs would attempt to cheat the system by presenting distantly produced goods as locally produced, as we can expect income in regular currency generally to be preferable to income in CC. Such attempts would also entail transport costs which should make the cargo less competitive in relation to genuinely local produce, suggesting that the logic of local market mechanisms would by and large obviate the problem.
How would differences in local conditions (such as climate, soils, and urbanism) be dealt with?It is unavoidable that there would be significant variation between different locales in terms of the conditions for producing different kinds of goods. This means that relative local prices in CC for agiven product can be expected to vary from place to place. This may in turn mean that consumption patterns will vary somewhat between locales, which is predictable and not necessarily a problem. Generally speaking, a localization of resource flows can be expected to result in a more diverse pattern of calibration to local resource endowments, as in premodern contexts. The proposed system allows for considerable flexibility in terms of the geographical definition of what is categorized as local, depending on such conditions. In a fertile agricultural region, the radius for local produce may be defined, for instance, as 20 km, whereas in a less fertile or urban area, it may be 50 km. People living in urban centers are faced with a particular challenge. The reform would encourage an increased production of foodstuffs within and in the vicinity of urban areas, which in the long run may also affect urban planning. People might also choose to move to the countryside, where the range of subsistence goods that can be purchased with CC will tend to be greater. In the long run, the reform can be expected to encourage a better fit between the distribution of resources (such as agricultural land) and demography. This is fully in line with the intention of reducing long-distance transports of necessities.
What would the consequences be if people converted resources from one currency sphere into products or services sold in another? It seems unfeasible to monitor and regulate the use of distant imports (such as machinery and fuels) in producing produce for local markets, but as production for local markets is remunerated in CC, this should constitute a disincentive to invest regular money in such production processes. Production for local consumption can thus be expected to rely mostly – and increasingly – on local labor and other resource inputs.
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