Delta Variant is Coming and I’m not Concerned.

If you look at the cases of the Delta variant of Covid coming out of the UK it looks alarming and it appears we’re getting ready to get another wave of Covid to shut down the world. But not so fast.

Let’s take a look at the hospitalization and the death rate.

Hospitalizations are clearly ticking up but clearly not with the velocity of the infection rate.

Death rate although lagging appears to be the same.

Pretty flat given what the first and second waves did to the UK.

One of two things are happening. Either A, the delta variant is not as deadly. Or B, the vaccinations are working.

But what about the kids? Kids or people under 20 haven’t really been impacted by Covid. Deaths aren’t a perfect summary of this. But they do give you an idea of the impact. You can extrapolate the hospitalizations based on these figures.

I would be concerned if I was elderly, had pre-existing conditions, or wasn’t vaccinated. Meaning I would still wear a mask and social distance. But outside of those parameters, this new variant does not appear to be nearly as deadly as the first for people who are vaccinated.

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Are we living in a simulation?

I was reading this article today from the Wall Street Journal – Brain Implant Lets Man ‘Speak’ After Being Silent for More Than a Decade(Original article from the New England Journal of Medecine). It begs the question, are we living in a simulation?

It may be a good time to watch the movie, The Matrix. Perhaps it wasn’t so far-fetched after all.

Here is a brief overview of the concept of the technology.

This means we’ll be able to communicate with each other without ever speaking or hearing. The concept is amazing if you take a second to think about it. Computers are interpreting our senses. They are reading the signals from this man’s brain, pushing those through a deep neural network, and decoding those signals into sentences.

  • Imagine tasting without ever putting anything in your mouth.
  • Imagine smelling without ever sniffing.
  • Imagine seeing without ever opening your eyes.
  • Imagine talking without opening your mouth.
  • Imagine hearing but there is no noise.

Once this technology emerges there is no reason why the matrix could/does not exist. In fact, it makes it difficult to argue that you may potentially be living in a simulation currently. Keep an eye on Elon Musk’s Neuralink.

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Finding the Next Gamestop or AMC

As we see the surge of meme stocks like AMC 36.99 -0.25 -0.67% or GME 180.36 +1.51 +0.84% you might be wondering how you can profit and get the jump on the next meme stock to pop. You can actually look at the stock options volume leaders chart. This chart will give you ideas for what stocks are most likely to pop before they actually do. Another chart to look at is the most active stocks by volume.

Once you do your research and are ready to invest in a specific company you can then use a breakout strategy like turtle trading to place stop orders to enter your trades at specific price levels. Another approach is to buy out of the money put or call options that have the ability to drastically increase in value as the stocks start to move.

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Closing SLV trade – 121% in ~10 months

Last year during Covid I decided to purchase some silver options.

4/20/202025925191587Bought SLV Jan 21 2022 15.0 Call @ 3.25
4/20/202025925192864Bought SLV Jan 21 2022 15.0 Call @ 3.25
4/21/202025951958123Bought SLV Jan 21 2022 20.0 Call @ 2.03
5/15/202026407463083Bought SLV Jan 21 2022 30.0 Call @ 1.15
5/28/202026590777533Bought SLV Jan 21 2022 19.0 Call @ 2.59

Reasons for the trade

  • Gold/Silver ratio was the highest it’s been in years.
  • Covid was sure to send the government into a massive printing spree.
  • Silver is the “poor man’s gold” most people could afford to buy it.
  • APMEX.com where I buy my precious metals had a huge spread on silver over spot price.

Exiting the Trade

I’ve now closed this trade with 121% in profit. What is funny is the profit came the same week I initially made the purchase. I just held it for a long time because I thought the government’s printing press would push it a lot further. However, I’m starting to lose confidence in precious metals as a hedge to government printing, for the short term anyway. I more so think we’ll see inflation and as that loses control a shift to precious metals as a hedge to wealth preservation. I’m keeping my VDC(Vanguard Consumer Staples ETF) position open for now.

3/10/202133321473374Sold SLV Jan 21 2022 30.0 Call @ 1.94
3/10/202133321512258Sold SLV Jan 21 2022 19.0 Call @ 6.25
3/10/202133321508484Sold SLV Jan 21 2022 15.0 Call @ 9.5
3/10/202133321479857Sold SLV Jan 21 2022 20.0 Call @ 5.59

Keeping the trade open

I think there is plenty of reason for someone to keep a trade open based on some of the supply volatility we’ve seen over the last couple of months. However, my precious metals positions are getting hit pretty hard lately and I’m not sure I want to maintain this trade.

I should also note I still maintain 1-2% of my net worth in physical silver. The target is 1% but the fluctuation comes from price increases.

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Closing ULTHF trade 17.8% – 13 days

You can read about my previous post on this short position here.

This stock has returned to its normal volatility and I’m up 17.8% in about two weeks. I’m happy with this trade. I closed my position today at .82

The original premise of the trade was to short this giant undeserved spike in the price indicated in the picture below. I’m still confident there is a ton of room for this to continue to the downside. However, it’s recent volume is low and I have no reason to expose myself to any unforeseen risk.

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Statistical Arbitrage in Pairs Based Trading

I was discussing principal component analysis and eigenvalues with a friend today. If you’re not familiar with stat arb in the pairs-based trading world this paper is a good read.

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Why I’m shorting ULTHF

I woke up to this text message yesterday.

It was completely unsolicited and I have no idea what the source of it is. Could it be a potential pump and dump given the current market circumstances? Maybe… so I decided to dig a little into this company. It looks like it spiked a few years back and has been basically worthless for the last 3 years.

What’s interesting is it looks like it is being pumped again recently. Here is the last 2 years.

Zooming in closer it looks like there has been a massive amount of volume increase in the last 3 days. Hence my text message perhaps?

What about Google Trends did people recently just start searching for ULTH or ULTHF?

I wonder what reddit has to say.

Financials

Finally, I wonder what their financials look like? Would I be comfortable holding this short position?

Let’s keep in mind this company has a market cap of $42m

But..

Only $80k in cash.

$7,500 in accounts receivable

$92k in assets

$323k in liabilities

-$5,032,200 in retaind earnings

But Lithium is rare and the price is about to explode!

So let’s take a look at LIT which is an ETF that holds a bunch of Lithium related stocks. https://www.globalxetfs.com/funds/lit/

As you can see from their holdings ULTHF is not listed. This adds further evidence this stock should be shorted. In fact, if you wanted to take a more market neutral approach to this trade you could go long an equal-weighted amount of LIT.

Time to get short

Seems like more pump and dump hype. I’m definitely going short.

I tried to get short on 2/24 @ 1.40 but my broker didn’t have any shares available.

So I got an email this morning…

I was able to open a position this morning short @ 1.15. It has fallen already so I’m opening another short position @ 1.01. This trade would already be up 40% if it wasn’t rejected yesterday.

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The world’s largest short squeeze tomorrow? My 2020 trade already up 193% should benefit heavily.

Last year I was looking to up my precious metal holdings. I like to keep 10% of my net worth in gold and 1% in silver. I bumped my gold holdings to 20% given the Coronavirus outbreak amongst other reasons outlined below. However, when I went to go and purchase silver from APMEX. I noticed the cheapest bullion I could get was something like 10-20% over spot price So I switched to long-dated options instead. I landed on a few. But eventually piled in on one a strike price of 30 with an expiration of January 21st, 2022. I bought these for $1.15 at the time. Looks like I actually picked the worst out of the four that I bought. No worries though I’m not complaining at a 192.68% increase.

The reason for my trade were as follows:

Physical silver was trading way over spot price at APMEX

The gold to silver ratio was the highest it has ever been in the last 100-years.

When governments get in trouble they just inflate your money away. It has been this way since the beginning of time.

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The federal reserve rate was basically dropped to 0% indicating massive problems.

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Silver is the “poor man’s gold” as Covid struck harder I assumed it would rally on the Fed’s printing press which was sure to accelerate and the Fed’s balance sheet had spike massively.

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The fed now owns 1/3 of all mortgage-backed securities. They are literally bailing out every asset class at risk of jeopardizing the future of the sovereign credit.

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Update:

r/wallstreetbets - Wikipedia

It has been rumored that online bullion sites have ran out of silver until the markets open tomorrow and Wall Street Bets may have their sites set on SLV as their next target. I’m not so sure they can pump silver up 1,600% like they did with GME but it will be interesting to see what can be done. Supply of silver is already very low after the markets closed Friday. Here is a quote from WSB, “Corner the market. GV thinks its possible to squeeze $SLV, FUCK AFTER SEEING $AG AND $GME EVEN I THINK WE CAN DO IT. BUY $SLV GO ALL IN TH GAINZ WILL BE UNLIMITED. DEMAND PHYSICAL IF YOU CAN. FUCK THE BANKS.

I just put in a big order for SLV options 30.5 strike expiring 2/5/21. My issue is the market is closed. I put in the order at .23 limit and I’m not sure if it will get filled. Regardless I’m still holding a bunch of futures from my previous trade. Future markets are already showing a large breakout.

Here is a message from the CEO of APMEX:

APMEX Statement On Current Market Conditions:

In the last week, we have seen a dramatic shift in Silver demand from our customers. For example, the ratio of ounces sold per day was running about two times earlier in the week and closer to four times the average demand by the end of the week. Once markets closed on Friday, we saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day. Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week.

Any Precious Metal dealer will take a long position in the futures market to protect against spot price exposure when the markets open. We do this because it is our goal not to take a speculative position on metal. The weekends are unique as we are not able to real-time hedge our position. We took an aggressive position this weekend, but clearly could not have predicted the volumes that were seen. We have partnerships around to world that allowed us to cover these long positions, but only to a point. Once we exceeded our comfort levels, we had little choice but to stop the sale of Silver on our website. This was a difficult decision to make and unprecedented in our history.

As we evaluate the markets, it is difficult to know where Silver’s price and demand will go in the coming day and weeks. APMEX is highly capitalized and has more than $150 million in inventory to support demand. We have made strategic decisions to procure additional metal, locking up any metal we can find in the market place. We suspect premiums will rise and rise quickly, as we are seeing significant increases in our costs, when we can even locate the metal. It is also highly likely that we will need an additional day or two to fill orders based on current order counts. The one guarantee we can make to our customers is that you will only be sold metal that is on-site, or we have procured the metal with a firm commitment date from our partners. In markets like this, we feel this is the best approach a retailer can take, as no one can predict product availability.

We want to thank our customers for their patience and understanding during these turbulent times. APMEX prides itself on best in class service and delivering on promises to our customers.

Regards,

Ken Lewis
CEO, APMEX

I’ll let TheHappyHawaiian explain:

Here is his updated post:

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