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.
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.
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.
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.
The federal reserve rate was basically dropped to 0% indicating massive problems.
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.
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.
Update:
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.
I remember back in 2000 during the dot com bubble all of these companies would pay you just to surf the internet using their browser or plugin. We may be in another bubble of some sort but that’s not my purpose of this article.
Recently I received a pop up on Facebook for SoFi. A free $350 just for funding a loan. Interesting, so for kicks I applied. My application is still pending but I can’t imagine I won’t get funded. They had a minimum loan amount of $10,001.
They indicate that they will give you the $300 within 30 days of funding your loan. The interest rate is 9.25% which is about $77/month in interest. So you’ll want to pay the loan off with the money you receive as soon as the bonus funds are received. Technically you’re probably only going to net $223. But hey that’s almost 40% of what the government is giving out for stimulus.
What’s interesting is this company is also giving away a free $50 in stocks just for opening an investment account. Another free $25 in Bitcoin just for opening a crypto currency account and buying at least $10 worth of crypto.
Seems like they’re pretty desperate to boost their sales for their upcoming IPO and inflate their valuation. You might as well take advantage of it.
