Most Intriguing Investment Idea of the Day Thread

[daverobev]

user growth was only 101.7 million daily active users IN THE FOURTH QUARTER ALONE

I'm going to guess that the majority if not the vast majority of these were bots...

I mean it's not like 400 million new unique people joined in 2024. Reddit's been around a while.

"daily active users", not "new users".  You cannot multiply "daily active users" by four.

"While the company’s daily active unique visitors in the fourth quarter climbed 39% to an average of 101.7 million from a year earlier, the metric fell short of the 103.2 million consensus."
https://www.investopedia.com/reddit-stock-slips-after-disappointing-user-growth-watch-these-price-levels-11679111

OIC, grew to 101.7 million, not growth of. That makes more sense.

[ChpBstrd]

user growth was only 101.7 million daily active users IN THE FOURTH QUARTER ALONE

I'm going to guess that the majority if not the vast majority of these were bots...

I mean it's not like 400 million new unique people joined in 2024. Reddit's been around a while.

"daily active users", not "new users".  You cannot multiply "daily active users" by four.

"While the company’s daily active unique visitors in the fourth quarter climbed 39% to an average of 101.7 million from a year earlier, the metric fell short of the 103.2 million consensus."
https://www.investopedia.com/reddit-stock-slips-after-disappointing-user-growth-watch-these-price-levels-11679111

OIC, grew to 101.7 million, not growth of. That makes more sense.

Yes, this was my error!

Reddit seems to have attracted a lot of people who are dumping Twitter, and maybe that effect is tapering off. Yet it's still among the fastest growing publicly traded social media companies, and I'm sticking to my thesis that it's on the same trajectory as Facebook a decade ago.

I rolled my 190 short puts to next week, and rolled my 242.5 short calls down to 212.50 and out to next week. On the first trade, I took a credit of $281. On the second, a credit of $218 x 200 = $436. This was not enough to offset the effect of the drop on my long shares, but it demonstrates the use of options to dig out a stock hit by perceived bad news.

[ChpBstrd]

Reddit is turning into "ream-it"!

In just the second half of February, the stock has freefallen about 30.5% 32%, from $229 to $159 $155. I decided to take assignment on my 190 puts and have sold calls on the way down, rolling down my strike prices against textbook advice, but at least clawing back some of the losses. My cost basis is about $185 and falling by about 75c per day due to time decay of short call options.

It's not just RDDT's disappointing subscriber growth number from two weeks ago. Other high-risk / meme stocks have also tanked in the last couple of weeks, including NVDA (-12%), GME (-13%), COIN (-22%), and even the Nasdaq is down almost 3%. Crypto is tanking, and bond yields are falling as investors flee toward perceived safety. The 10-year yield has fallen about 50 basis points since mid-January, as investors seem to suddenly be considering the recessionary implications of tariffs and the reverse stimulus effect from government layoffs. EDV and ZROZ are both up over 5% this month.   

The broader risk-off mood contradicts the idea that the subscriber growth disappointment is what led to RDDT's correction. I remain optimistic about RDDT's long-term META-like earnings potential because they are barely monetized. As user growth slows, we can expect them to accelerate monetization. Recall that META had a similar growth scare in 2018, which led to a -28% correction, followed by an immediate rally that erased the loss within a year.

[chasesfish]

Back in the black on $RKT

A few of my other rate down bets have been nice, $ZROZ for one.

[ChpBstrd]

A few of my other rate down bets have been nice, $ZROZ for one.

Will you continue to hold bond duration, or trade out of it? Personally, I can't pick the direction because of the standoff between the Fed and the administration I describe here.

[vand]

I tend to agree, long duration bonds are more interesting from here and I think we may be due a good move back up after the lows they put in in January.

Personally I am looking more keenly at REITs. The sector looks really attractive to me right now.

[chasesfish]

A few of my other rate down bets have been nice, $ZROZ for one.

Will you continue to hold bond duration, or trade out of it? Personally, I can't pick the direction because of the standoff between the Fed and the administration I describe here.

I'm late the reply, I think it's hard to nearly impossible to speculate on interest rates, only hedge against outcomes.   Here's the case for long term yields coming down:   IMO, the consumption taxes on consumers via tariffs are a negative to GDP.   News will be focused on a single line item price increase, but overall there's less money going into private sector, more into the government, which is a negative.   Add in recessionary pressures from wide govt layoffs, uncertainty from a volatile stock market, and I think we get an economic contraction.   Tax collections are about to be very good for March / April coming off a strong 2024 in the stock market.  That'll reduce new supply / issuances from the treasury.   The Treasury Secretary is directly saying home loan rates need to be lower, which I think restricts the issuance of 10/30yrs to compete with mortgages.

The Federal Reserve has passed below their May of 2020 balance sheet levels, which I've thought will be difficult to get past.  Credit to them!  Think once they stop QT and maybe enact another round of QE, the long end of bond yields go down more.

I think that's a setup that will give us a window of lower rates, hopefully a 3% 5/10yr Treasury, followed by what we're seeing today (more normal rates) with 5-30yr treasuries between 4-5%.

I'll get out of $RKT at + 20%, I'll get out of some bonds / rate hedges if/when equities look attractive again.   If we get a real market vomit (20%+), the treasuries should be going in the opposite direction then I'll pull the trigger.  If not, that's fine too.

[ChpBstrd]

Asset: EWZ (Brazilian stock ETF)
Price: $24.65 today, but wait until about July 15 to buy at $20-22, or sell puts until you average down to that price.
Rationale:
According to Yardeni, Brazil has 19.9% expected earnings growth in 2025, after two years of declining earnings and a stock market that has gone nowhere since 2021. The country's PE ratio of 7.2 (seven point two) reflects an economy that is dealing with inflationary pressures and insanely high interest rates.

This may seem like the classic falling-knife value trap play, but the specific prediction I'm making is that the BRICS conference on July 6-7 will result in comments about creating an alternative to the SWIFT network and the USD as a reserve currency. That is, actually, exactly the agenda they are meeting to discuss, and host country Brazil has a president who has made detachment from US-centric payment systems a key policy goal. BRICS countries have been working since 2018 - Trump's first term - to establish a decentralized cryptocurrency-like platform for sending local currencies worldwide.

For context, see:
https://gulfnews.com/your-money/brazil-doubles-down-on-ditching-the-dollar-will-trumps-150-tariffs-strike-back-1.500051034
https://apnews.com/article/brazil-brics-summit-rio-ea1ad30cd114143d91840a37f96725ee

Trump has threatened 100% to 150% tariffs on any country that participates in such an attempt at a new payment network. Yet, it is exactly these sorts of threats plus the threats of sanctions that are encouraging countries around the world to get on board. I predict Trump's betrayal of key trading partners (i.e. tearing up his own negotiated trade deal with Canada and Mexico) will bring things to a head, and cause the urgent establishment of a BRICS Pay market. As the AP article describes, countries around the world are rapidly getting on board. 

Sometime in July, Trump will throw a fit and try to impose tariffs on Brazil (among others). The tariffs will cause an initial selloff of Brazilian stocks, as the US receives 11% of Brazil's exports, where exports comprise 18.1% of Brazil's GDP, and that will be the time to buy the dip. A complete loss of the US export market would hit GDP an entire 2% and cause a minor recession.

Tariffs and Trump's erratic behavior toward trading partners and allies will provide a supportive environment for adoption of BRICS Pay, and the more the US tries to use tariffs and sanctions to stop it, the more countries will get on board. I'm betting BRICS Pay becomes a competing international standard for payments processing in member countries' local currencies, starting in 2026.

Of the BRICS, Brazil and India have the most developed capitalist economies. Their scores on the democracy index were a bit lower than the US in 2023, but they might have the lead nowadays. I like both countries, but India has a forward PE of 20.7 compared to Brazil's 7.2. Brazil is attractive for lots of reasons having nothing to do with BRICS Pay or valuation. Yet I think US investors need to get onboard with BRICS Pay, as it seems likely Trump will disintegrate the Western world order we're used to and raise the value of the next best developed alternative. Buying Brazil is a hedge against the possible decline of USD hegemony that is the main support for US standards of living. For US investors, this is making the most of a bad situation.

The Play:
Let Donald Trump punch a 10-20% hole in Brazil's stock market in July. Then buy the dip by DCA'ing over two or three weeks. Then watch Brazil's valuation double as it becomes clearer that BRICS Pay is here to stay, and Rio is destined to become a major financial center on the Southern continent.

Related note:
Once BRICS Pay is running at scale, there will be nothing to stop China from taking Taiwan in 2026 or 2027. Western sanctions will be nearly toothless, NATO will be broken, Trump is a non-interventionist, and after this year's tax bill blows up the deficit the US treasury market will be too fragile to risk a retaliatory Chinese sell-off. The Chinese have been setting up this chess board for years. A BRICS Pay scale-up is your sign to buy puts on Taiwanese stocks, starting in about April 2026. TSMC, for example, will likely lose equity in most of its assets when the invasion occurs. You could do worse in such a world than going long Brazil and short Taiwan.

[BicycleB]

Asset: EWZ (Brazilian stock ETF)
Price: $24.65 today, but wait until about July 15 to buy at $20-22, or sell puts until you average down to that price.
Rationale:
According to Yardeni, Brazil has 19.9% expected earnings growth in 2025, after two years of declining earnings and a stock market that has gone nowhere since 2021. The country's PE ratio of 7.2 (seven point two) reflects an economy that is dealing with inflationary pressures and insanely high interest rates.

This may seem like the classic falling-knife value trap play, but the specific prediction I'm making is that the BRICS conference on July 6-7 will result in comments about creating an alternative to the SWIFT network and the USD as a reserve currency. That is, actually, exactly the agenda they are meeting to discuss, and host country Brazil has a president who has made detachment from US-centric payment systems a key policy goal. BRICS countries have been working since 2018 - Trump's first term - to establish a decentralized cryptocurrency-like platform for sending local currencies worldwide.

For context, see:
https://gulfnews.com/your-money/brazil-doubles-down-on-ditching-the-dollar-will-trumps-150-tariffs-strike-back-1.500051034
https://apnews.com/article/brazil-brics-summit-rio-ea1ad30cd114143d91840a37f96725ee

Trump has threatened 100% to 150% tariffs on any country that participates in such an attempt at a new payment network. Yet, it is exactly these sorts of threats plus the threats of sanctions that are encouraging countries around the world to get on board. I predict Trump's betrayal of key trading partners (i.e. tearing up his own negotiated trade deal with Canada and Mexico) will bring things to a head, and cause the urgent establishment of a BRICS Pay market. As the AP article describes, countries around the world are rapidly getting on board. 

Sometime in July, Trump will throw a fit and try to impose tariffs on Brazil (among others). The tariffs will cause an initial selloff of Brazilian stocks, as the US receives 11% of Brazil's exports, where exports comprise 18.1% of Brazil's GDP, and that will be the time to buy the dip. A complete loss of the US export market would hit GDP an entire 2% and cause a minor recession.

Tariffs and Trump's erratic behavior toward trading partners and allies will provide a supportive environment for adoption of BRICS Pay, and the more the US tries to use tariffs and sanctions to stop it, the more countries will get on board. I'm betting BRICS Pay becomes a competing international standard for payments processing in member countries' local currencies, starting in 2026.

Of the BRICS, Brazil and India have the most developed capitalist economies. Their scores on the democracy index were a bit lower than the US in 2023, but they might have the lead nowadays. I like both countries, but India has a forward PE of 20.7 compared to Brazil's 7.2. Brazil is attractive for lots of reasons having nothing to do with BRICS Pay or valuation. Yet I think US investors need to get onboard with BRICS Pay, as it seems likely Trump will disintegrate the Western world order we're used to and raise the value of the next best developed alternative. Buying Brazil is a hedge against the possible decline of USD hegemony that is the main support for US standards of living. For US investors, this is making the most of a bad situation.

The Play:
Let Donald Trump punch a 10-20% hole in Brazil's stock market in July. Then buy the dip by DCA'ing over two or three weeks. Then watch Brazil's valuation double as it becomes clearer that BRICS Pay is here to stay, and Rio is destined to become a major financial center on the Southern continent.

Related note:
Once BRICS Pay is running at scale, there will be nothing to stop China from taking Taiwan in 2026 or 2027. Western sanctions will be nearly toothless, NATO will be broken, Trump is a non-interventionist, and after this year's tax bill blows up the deficit the US treasury market will be too fragile to risk a retaliatory Chinese sell-off. The Chinese have been setting up this chess board for years. A BRICS Pay scale-up is your sign to buy puts on Taiwanese stocks, starting in about April 2026. TSMC, for example, will likely lose equity in most of its assets when the invasion occurs. You could do worse in such a world than going long Brazil and short Taiwan.

Depressing but logical. Certainly fits the tltle of intriguing!

Do you think investors need to worry about US acting against holders of foreign stocks?

When US sanctioned Russia, actions included total loss for US holders of Russian stock. In the event of economic conflict with BRICS, could US investors need to worry about US punishment or invalidation of investment in BRICS-based stock?

[ChpBstrd]

Do you think investors need to worry about US acting against holders of foreign stocks?

When US sanctioned Russia, actions included total loss for US holders of Russian stock. In the event of economic conflict with BRICS, could US investors need to worry about US punishment or invalidation of investment in BRICS-based stock?

Normally this would be a laughable question, but people in the US will be living in a corrupt one-party state for at least the next decade, with courts stacked by the ruling party, and with executive orders meaning more than law or property rights. Democrats are not coming back, as they seem to have learned nothing, are trying no new strategies, and are still for the most part unable to organize themselves under the umbrella of an anti-hierarchical ideology. 

Our "new" governance structure is less like the convoluted, adversarial systems that protected property rights in the past, and more like emperor-driven system of ancient Rome. It seems Western civilizations naturally decay into such a format. The old assumptions may no longer apply.

Additionally, devaluation of the USD seems like the only politically feasible way to sustain the US's growing national debt or expanding deficits. So in addition to property rights worries, US investors should have currency worries. BRICS Pay is swooping in to create an alternative to the existing system in which developing nations subsidize the lifestyles of less-productive citizens in the reserve currency empire. For example, developing nations must to run export surpluses to obtain dollars for international trade and often must take the risk of issuing debt in USD.

So investors in the US need to think about eventually setting up brokerage and retail accounts tied into BRICS Pay to protect their ability to invest and move money worldwide and diversify their currency exposure away from the USD. This is of course, a separate issue from the idea of a one or two year EWZ trade in US exchanges, but it could be an important step to take in anticipation of a future world where SWIFT-based currency controls and sanctions are used in an attempt to prop up the USD and keep all of us rats on the sinking ship. Now is the time to plan multiple routes and contingencies for getting your wealth out of country. Foreign accounts in Switzerland or the Bahamas will only work while SWIFT (i.e. the US government) allows them to work.

I don't think BRICS Pay is there yet, and it may never work, but keep an eye on this space.

[vand]

Yes, LatAm Brazil and Mexico are your classic contrarian plays right now.

Worked with China last year - recovery is well under way there and I think it has plenty to run.

[2sk22]

Yes, LatAm Brazil and Mexico are your classic contrarian plays right now.

Worked with China last year - recovery is well under way there and I think it has plenty to run.

Checkout this thread on BlueSky: https://bsky.app/profile/bobeunlimited.bsky.social/post/3ljzck7y4qc25

[ChpBstrd]

Yes, LatAm Brazil and Mexico are your classic contrarian plays right now.

Worked with China last year - recovery is well under way there and I think it has plenty to run.

Mexico will go into a deep recession if the tariffs stick. Brazil... might survive or have a slight recession, depending largely upon commodity prices. Basically, get far, far away from the U.S. or trade dependency on the U.S.

Brazil, India, Malaysia, and Australia are on my radar. I still think China is uninvestable. Also, I'm thinking 2-3 years ahead, rather than a 2-3 month trade. China ETFs might do quite well short-term, but reversion to the mean driven by political risk dooms that market in the long term. China ETFs will go the way of Russia ETFs on the day they invade Taiwan - possibly as soon as next year. It's never a good idea to play an investment for a few months that you wouldn't be willing to sit in for a couple of years, in case your timeframe is wrong.

[MustacheAndaHalf]

I just bought shares of GLL, ProShares UltraShort Gold, which is $14.43/share right now.

Trump's actions are causing high volatility in market prices, which can make gold look like a safer alternative.  If Trump stops his tariff tantrum, markets might ease, and the price of gold ease with it.

Russia has been mining and selling gold to help its economy, which might be applying downward pressure on gold.

It can be hard to predict what goods will suddenly cost +25% more.  I think Americans saw tariffs coming, and bought gold from other countries ($3 billion in one month from Australia) before tariffs hit.  Now that tariffs are in place, that demand might ease.

Gold's 12 month performance is +35%, which begs for reversion to the mean.

[ChpBstrd]

Asset: UDN call option, 9/19 expiration, 15 strike
Price: $2.77 mid price (underlying is $17.64)
Rationale:
It's time for US investors to start doing something they've never done before: hedging the value of the US dollar. UDN represents the easiest way to do so, at a cost of a 0.75% expense ratio. The fund uses derivatives to track the inverse performance of the USD against six other major world currencies.

Possible catalysts include:

• Tariffs: a currency is worth what it can buy, and tariffs represent a tax on what the USD can buy.
• Crypto Reserve: Foreign investors may be unnerved by subsidizing a government that is using their treasury funds to collect cryptocurrency, or accepting taxes in crypto. Such a government might switch currencies and devalue the currency of their bonds.
• Massive Deficits: The coming tax bill will almost certainly expand the US's deficits by A LOT. How long until investors start fearing a devaluation?
• Governance Quality: People are buying Trump merch, staying at Trump hotels, and buying Trump/Melania crypto as a semi-legal way to put money in the hands of politicians. This is corruption, as is firing FBI agents, SEC regulators, and more. So why should foreign savers hold USD's instead of, say, British Pounds or Japanese Yen? Those governments are both far more honest than the US.
• Weak-Dollar Policy: The administration has alluded to policies such as affecting the Fed to push rates lower or cancelling treasury debts to certain entities (defaulting). Meanwhile, the erratic behavior has affected foreign investor confidence. A weaker dollar and high tariffs would be required to "bring manufacturing back to the US".
• BRICS Pay: Could negate the point of a world reserve currency and create a China-centric bypass.

UDN yields 5.25% and is up 5.19% YTD.

Unfortunately, options are only available out to September 19, so there are no straightforward ways to obtain a leveraged position to protect a much larger portfolio of, say, dollar-denominated bonds or dollar-earning stocks for years at a time. Look to the futures market for such a product, and understand its downsides.

But for the cost of 13 cents per share in time value, you can hedge your US dollar exposure for six months at a time, using the option I highlighted. More importantly, with the call option you profit if UDN goes up, but you only lose the value of the option if UDN goes down more than 17.6%. I doubt the US dollar will go up nearly 17.6% in the next six months.

IF the fund moved 1:1 with the US dollar*, spending 13 cents on time value to control shares at $17.64 would represent a 0.74% cost of hedging, every six months, or less than 1.5% per year. Of course, you could lose up to the entire $2.77 spent on the call, but the US dollar would have to rise about 17.6% for that to happen.

Disclaimer: This is exactly the sort of news-driven investment that did poorly last year.

*the fund uses quarterly contracts to track the USD over time, so the price may vary over longer periods of time due to contango/backwardization.

[vand]

Buy the market here in anticipation of an almighty rally here.  Long only.

Nothing too clever here, this is a pure "sentiment is so bad it's a contrarian indicator" call.

AAII ratio of bears to bull has spike to a level only seen previously on:

1990 - Gulf War
1992 - (Black Wednesday & ERM Suspended in Europe)
2007/09 - Start & culmination of the GFC
2022 - Inflationary panic

[erjkism]

Asset: UDN call option, 9/19 expiration, 15 strike
Price: $2.77 mid price (underlying is $17.64)
Rationale:
It's time for US investors to start doing something they've never done before: hedging the value of the US dollar. UDN represents the easiest way to do so, at a cost of a 0.75% expense ratio. The fund uses derivatives to track the inverse performance of the USD against six other major world currencies.

Possible catalysts include:

• Tariffs: a currency is worth what it can buy, and tariffs represent a tax on what the USD can buy.
• Crypto Reserve: Foreign investors may be unnerved by subsidizing a government that is using their treasury funds to collect cryptocurrency, or accepting taxes in crypto. Such a government might switch currencies and devalue the currency of their bonds.
• Massive Deficits: The coming tax bill will almost certainly expand the US's deficits by A LOT. How long until investors start fearing a devaluation?
• Governance Quality: People are buying Trump merch, staying at Trump hotels, and buying Trump/Melania crypto as a semi-legal way to put money in the hands of politicians. This is corruption, as is firing FBI agents, SEC regulators, and more. So why should foreign savers hold USD's instead of, say, British Pounds or Japanese Yen? Those governments are both far more honest than the US.
• Weak-Dollar Policy: The administration has alluded to policies such as affecting the Fed to push rates lower or cancelling treasury debts to certain entities (defaulting). Meanwhile, the erratic behavior has affected foreign investor confidence. A weaker dollar and high tariffs would be required to "bring manufacturing back to the US".
• BRICS Pay: Could negate the point of a world reserve currency and create a China-centric bypass.

UDN yields 5.25% and is up 5.19% YTD.

Unfortunately, options are only available out to September 19, so there are no straightforward ways to obtain a leveraged position to protect a much larger portfolio of, say, dollar-denominated bonds or dollar-earning stocks for years at a time. Look to the futures market for such a product, and understand its downsides.

But for the cost of 13 cents per share in time value, you can hedge your US dollar exposure for six months at a time, using the option I highlighted. More importantly, with the call option you profit if UDN goes up, but you only lose the value of the option if UDN goes down more than 17.6%. I doubt the US dollar will go up nearly 17.6% in the next six months.

IF the fund moved 1:1 with the US dollar*, spending 13 cents on time value to control shares at $17.64 would represent a 0.74% cost of hedging, every six months, or less than 1.5% per year. Of course, you could lose up to the entire $2.77 spent on the call, but the US dollar would have to rise about 17.6% for that to happen.

Disclaimer: This is exactly the sort of news-driven investment that did poorly last year.

*the fund uses quarterly contracts to track the USD over time, so the price may vary over longer periods of time due to contango/backwardization.

What happens if you just buy and hold UDN instead of messing around with the options?

[ChpBstrd]

Asset: UDN call option, 9/19 expiration, 15 strike
Price: $2.77 mid price (underlying is $17.64)
Rationale:
It's time for US investors to start doing something they've never done before: hedging the value of the US dollar. UDN represents the easiest way to do so, at a cost of a 0.75% expense ratio. The fund uses derivatives to track the inverse performance of the USD against six other major world currencies.

Possible catalysts include:

• Tariffs: a currency is worth what it can buy, and tariffs represent a tax on what the USD can buy.
• Crypto Reserve: Foreign investors may be unnerved by subsidizing a government that is using their treasury funds to collect cryptocurrency, or accepting taxes in crypto. Such a government might switch currencies and devalue the currency of their bonds.
• Massive Deficits: The coming tax bill will almost certainly expand the US's deficits by A LOT. How long until investors start fearing a devaluation?
• Governance Quality: People are buying Trump merch, staying at Trump hotels, and buying Trump/Melania crypto as a semi-legal way to put money in the hands of politicians. This is corruption, as is firing FBI agents, SEC regulators, and more. So why should foreign savers hold USD's instead of, say, British Pounds or Japanese Yen? Those governments are both far more honest than the US.
• Weak-Dollar Policy: The administration has alluded to policies such as affecting the Fed to push rates lower or cancelling treasury debts to certain entities (defaulting). Meanwhile, the erratic behavior has affected foreign investor confidence. A weaker dollar and high tariffs would be required to "bring manufacturing back to the US".
• BRICS Pay: Could negate the point of a world reserve currency and create a China-centric bypass.

UDN yields 5.25% and is up 5.19% YTD.

Unfortunately, options are only available out to September 19, so there are no straightforward ways to obtain a leveraged position to protect a much larger portfolio of, say, dollar-denominated bonds or dollar-earning stocks for years at a time. Look to the futures market for such a product, and understand its downsides.

But for the cost of 13 cents per share in time value, you can hedge your US dollar exposure for six months at a time, using the option I highlighted. More importantly, with the call option you profit if UDN goes up, but you only lose the value of the option if UDN goes down more than 17.6%. I doubt the US dollar will go up nearly 17.6% in the next six months.

IF the fund moved 1:1 with the US dollar*, spending 13 cents on time value to control shares at $17.64 would represent a 0.74% cost of hedging, every six months, or less than 1.5% per year. Of course, you could lose up to the entire $2.77 spent on the call, but the US dollar would have to rise about 17.6% for that to happen.

Disclaimer: This is exactly the sort of news-driven investment that did poorly last year.

*the fund uses quarterly contracts to track the USD over time, so the price may vary over longer periods of time due to contango/backwardization.

What happens if you just buy and hold UDN instead of messing around with the options?

You ride the inverse of the US dollar, similar as if you put a bunch of Euros, Yen, Pounds, etc. in a safe. You also earn the dividend yield, although I would need to dig deeper to confirm that does not include some return of capital. EDN uses contracts rather than holding bonds, to replicate its index, but it's entirely possible the yield of an international bond portfolio is reflected in the contract prices.

The experience would be similar to buying a fund of foreign bonds denominated in their domestic currencies. The problem is you'd only be 1x leveraged, so if this was, say 5% of your portfolio, it wouldn't be enough exposure to help you much in the event of a precipitous fall of the dollar. I.e. a 20% decline in the dollar and a 5% EDN allocation would only contribute 1% to your portfolio in that example! If you allocated a lot to UDN, you'd run the risk of an unforeseen dollar rally inflicting serious damage. I can think of reasons why that might occur, despite the US government's best efforts.

Thus, I'm looking at the call as a way to obtain leverage on the upside, while also limiting downside. It's a compromise, obviously. You'd have to re-up several times to get a few years' protection.

If you did want to allocate a lot to UDN, consider buying a protective put. A put at the 16 strike expiring in September could probably be bought for a nickel per share.

[BicycleB]

Asset: UDN call option, 9/19 expiration, 15 strike
Price: $2.77 mid price (underlying is $17.64)
Rationale:
It's time for US investors to start doing something they've never done before: hedging the value of the US dollar. UDN represents the easiest way to do so, at a cost of a 0.75% expense ratio. The fund uses derivatives to track the inverse performance of the USD against six other major world currencies.

Possible catalysts include:

• Tariffs: a currency is worth what it can buy, and tariffs represent a tax on what the USD can buy.
• Crypto Reserve: Foreign investors may be unnerved by subsidizing a government that is using their treasury funds to collect cryptocurrency, or accepting taxes in crypto. Such a government might switch currencies and devalue the currency of their bonds.
• Massive Deficits: The coming tax bill will almost certainly expand the US's deficits by A LOT. How long until investors start fearing a devaluation?
• Governance Quality: People are buying Trump merch, staying at Trump hotels, and buying Trump/Melania crypto as a semi-legal way to put money in the hands of politicians. This is corruption, as is firing FBI agents, SEC regulators, and more. So why should foreign savers hold USD's instead of, say, British Pounds or Japanese Yen? Those governments are both far more honest than the US.
• Weak-Dollar Policy: The administration has alluded to policies such as affecting the Fed to push rates lower or cancelling treasury debts to certain entities (defaulting). Meanwhile, the erratic behavior has affected foreign investor confidence. A weaker dollar and high tariffs would be required to "bring manufacturing back to the US".
• BRICS Pay: Could negate the point of a world reserve currency and create a China-centric bypass.

UDN yields 5.25% and is up 5.19% YTD.

Unfortunately, options are only available out to September 19, so there are no straightforward ways to obtain a leveraged position to protect a much larger portfolio of, say, dollar-denominated bonds or dollar-earning stocks for years at a time. Look to the futures market for such a product, and understand its downsides.

But for the cost of 13 cents per share in time value, you can hedge your US dollar exposure for six months at a time, using the option I highlighted. More importantly, with the call option you profit if UDN goes up, but you only lose the value of the option if UDN goes down more than 17.6%. I doubt the US dollar will go up nearly 17.6% in the next six months.

IF the fund moved 1:1 with the US dollar*, spending 13 cents on time value to control shares at $17.64 would represent a 0.74% cost of hedging, every six months, or less than 1.5% per year. Of course, you could lose up to the entire $2.77 spent on the call, but the US dollar would have to rise about 17.6% for that to happen.

Disclaimer: This is exactly the sort of news-driven investment that did poorly last year.

*the fund uses quarterly contracts to track the USD over time, so the price may vary over longer periods of time due to contango/backwardization.

What happens if you just buy and hold UDN instead of messing around with the options?

You ride the inverse of the US dollar, similar as if you put a bunch of Euros, Yen, Pounds, etc. in a safe. You also earn the dividend yield, although I would need to dig deeper to confirm that does not include some return of capital. EDN uses contracts rather than holding bonds, to replicate its index, but it's entirely possible the yield of an international bond portfolio is reflected in the contract prices.

The experience would be similar to buying a fund of foreign bonds denominated in their domestic currencies. The problem is you'd only be 1x leveraged, so if this was, say 5% of your portfolio, it wouldn't be enough exposure to help you much in the event of a precipitous fall of the dollar. I.e. a 20% decline in the dollar and a 5% EDN allocation would only contribute 1% to your portfolio in that example! If you allocated a lot to UDN, you'd run the risk of an unforeseen dollar rally inflicting serious damage. I can think of reasons why that might occur, despite the US government's best efforts.

Thus, I'm looking at the call as a way to obtain leverage on the upside, while also limiting downside. It's a compromise, obviously. You'd have to re-up several times to get a few years' protection.

If you did want to allocate a lot to UDN, consider buying a protective put. A put at the 16 strike expiring in September could probably be bought for a nickel per share.

Re interest - per Invesco, the fund generates interest from “primarily US Treasury securities”, less expenses and gains and losses on its trading in foreign futures contracts. I didn’t see the treasury securities duration but suppose it’s short. https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=investor&ticker=udn

[ChpBstrd]

Asset: UDN call option, 9/19 expiration, 15 strike
Price: $2.77 mid price (underlying is $17.64)
Rationale:
It's time for US investors to start doing something they've never done before: hedging the value of the US dollar. UDN represents the easiest way to do so, at a cost of a 0.75% expense ratio. The fund uses derivatives to track the inverse performance of the USD against six other major world currencies.

Possible catalysts include:

• Tariffs: a currency is worth what it can buy, and tariffs represent a tax on what the USD can buy.
• Crypto Reserve: Foreign investors may be unnerved by subsidizing a government that is using their treasury funds to collect cryptocurrency, or accepting taxes in crypto. Such a government might switch currencies and devalue the currency of their bonds.
• Massive Deficits: The coming tax bill will almost certainly expand the US's deficits by A LOT. How long until investors start fearing a devaluation?
• Governance Quality: People are buying Trump merch, staying at Trump hotels, and buying Trump/Melania crypto as a semi-legal way to put money in the hands of politicians. This is corruption, as is firing FBI agents, SEC regulators, and more. So why should foreign savers hold USD's instead of, say, British Pounds or Japanese Yen? Those governments are both far more honest than the US.
• Weak-Dollar Policy: The administration has alluded to policies such as affecting the Fed to push rates lower or cancelling treasury debts to certain entities (defaulting). Meanwhile, the erratic behavior has affected foreign investor confidence. A weaker dollar and high tariffs would be required to "bring manufacturing back to the US".
• BRICS Pay: Could negate the point of a world reserve currency and create a China-centric bypass.

UDN yields 5.25% and is up 5.19% YTD.

Unfortunately, options are only available out to September 19, so there are no straightforward ways to obtain a leveraged position to protect a much larger portfolio of, say, dollar-denominated bonds or dollar-earning stocks for years at a time. Look to the futures market for such a product, and understand its downsides.

But for the cost of 13 cents per share in time value, you can hedge your US dollar exposure for six months at a time, using the option I highlighted. More importantly, with the call option you profit if UDN goes up, but you only lose the value of the option if UDN goes down more than 17.6%. I doubt the US dollar will go up nearly 17.6% in the next six months.

IF the fund moved 1:1 with the US dollar*, spending 13 cents on time value to control shares at $17.64 would represent a 0.74% cost of hedging, every six months, or less than 1.5% per year. Of course, you could lose up to the entire $2.77 spent on the call, but the US dollar would have to rise about 17.6% for that to happen.

Disclaimer: This is exactly the sort of news-driven investment that did poorly last year.

*the fund uses quarterly contracts to track the USD over time, so the price may vary over longer periods of time due to contango/backwardization.

What happens if you just buy and hold UDN instead of messing around with the options?

You ride the inverse of the US dollar, similar as if you put a bunch of Euros, Yen, Pounds, etc. in a safe. You also earn the dividend yield, although I would need to dig deeper to confirm that does not include some return of capital. EDN uses contracts rather than holding bonds, to replicate its index, but it's entirely possible the yield of an international bond portfolio is reflected in the contract prices.

The experience would be similar to buying a fund of foreign bonds denominated in their domestic currencies. The problem is you'd only be 1x leveraged, so if this was, say 5% of your portfolio, it wouldn't be enough exposure to help you much in the event of a precipitous fall of the dollar. I.e. a 20% decline in the dollar and a 5% EDN allocation would only contribute 1% to your portfolio in that example! If you allocated a lot to UDN, you'd run the risk of an unforeseen dollar rally inflicting serious damage. I can think of reasons why that might occur, despite the US government's best efforts.

Thus, I'm looking at the call as a way to obtain leverage on the upside, while also limiting downside. It's a compromise, obviously. You'd have to re-up several times to get a few years' protection.

If you did want to allocate a lot to UDN, consider buying a protective put. A put at the 16 strike expiring in September could probably be bought for a nickel per share.

Re interest - per Invesco, the fund generates interest from “primarily US Treasury securities”, less expenses and gains and losses on its trading in foreign futures contracts. I didn’t see the treasury securities duration but suppose it’s short. https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=investor&ticker=udn

Thanks @BicycleB . This would suggest the yield will go down along with interest rates. Yet, falling interest rates might contribute to reducing the value of the USD, propping up the value of the contracts that make UDN an inverse fund.

[BicycleB]

I'll get out of $RKT at + 20%, I'll get out of some bonds / rate hedges if/when equities look attractive again.   If we get a real market vomit (20%+), the treasuries should be going in the opposite direction then I'll pull the trigger.  If not, that's fine too.

@chasesfish - do you mean 20% above your purchase price?

For example, 14 x 1.2 =16.80… today’s close of $15.71 has me thinking!

[chasesfish]

I'll get out of $RKT at + 20%, I'll get out of some bonds / rate hedges if/when equities look attractive again.   If we get a real market vomit (20%+), the treasuries should be going in the opposite direction then I'll pull the trigger.  If not, that's fine too.

@chasesfish - do you mean 20% above your purchase price?

For example, 14 x 1.2 =16.80… today’s close of $15.71 has me thinking!

I re-read my post and you're right, it doesn't make sense.

I think $RKT goes to $20.  I also bought some TLT and ZROZ as a hedge against rates dropping / softening economy. 

I won't reallocate my overall bond portfolio unless we see more than 20% off of the S&P.   I like the safety net at this point in my life.

[ChpBstrd]

My RDDT speculation is getting absolutely destroyed by this correction. Shares hit $106.42 earlier this morning. They were $225 back in early February. And no, I have not yet sold $119 per share in options premium.

After my way-OTM calls expire Friday, I’ll consider just holding the shares in order to fully participate in the recovery. Learning not to sell the dip comes before any thoughts of buying the dip. Another lesson: Be fearful when ChpBstrd is greedy; be greedy when ChpBstrd is fearful.

[reeshau]

Another lesson: Be fearful when ChpBstrd is greedy; be greedy when ChpBstrd is fearful.

In all seriousness, while I do often disagree with you, I don't ever find fault with your thinking, given your assumptions.  I find it very refreshing to have a place to discuss investments civilly, with people who have varying perspectives and approaches.  It challenges and sharpens my own thinking.

[MustacheAndaHalf]

I just bought shares of GLL, ProShares UltraShort Gold, which is $14.43/share right now.

Current performance -7.9%, with more uncertainty comes more gold demand.
Tariff uncertainty will increase on April 2, when more tariffs kick in, so I need to exit at a loss before then.

If gold settles down Friday, I'll sell then - otherwise I'll wait for Monday to sell.

[MustacheAndaHalf]

I just bought shares of GLL, ProShares UltraShort Gold, which is $14.43/share right now.

Current performance -7.9%, with more uncertainty comes more gold demand.
Tariff uncertainty will increase on April 2, when more tariffs kick in, so I need to exit at a loss before then.

If gold settles down Friday, I'll sell then - otherwise I'll wait for Monday to sell.

GLL up +2% today, so I sold at $13.59/share, which is -5.8% from my earlier post (-5.7% in my brokerage account).
I'm expecting worse performance leading up to April 2 trade tariffs.

Not only didn't I research this investment, I even got one aspect reversed.  If Putin agrees to a ceasefire that somehow reduces sanctions, that will lead to less dependence on gold, and less supply of gold by Russia.  It could hurt gold's price, not help it as I thought initially.

One small highlight is that I looked at the history of GLL and noticed spikes on Friday and Mondays.  Waiting for Friday was beneficial, saving me 2%.

[Must_ache]

The US Dollar is extremely high right now, and if it goes down wouldn't that mean gold has much farther to go?

[ChpBstrd]

Asset: Occidental Petroleum bond, CUSIP 674599DX0
Price: $708.61
Rationale:
What bond yields 6.88%, is rated BB+ (S&P) and Baa3 (Moody's), is non-callable, and is a core holding of Berkshire Hathaway? These OXY bonds!

What's the catch? The maturity date is November 1, 2096 (not a typo).

There are other OXY bonds with similar yields maturing in 2044-2049, such as 674599CF0, 674599CY9, or 674599DK8, but these are all callable.

The intriguing part about their 2096 bonds is the non-callable element. In the event of a severe disinflationary recession, with Treasuries falling into the 3% range, there would be a scramble for reliable income. By reliable, I mean you don't buy the bond and discover two months later that the corporation is calling them back so that they can reissue the debt at a half a percent lower coupon! In that event, bond investors would have to reinvest (in something) at the lower rates, and their income would go down. This bond represents locked-in nominal income, for as long as OXY or its purchaser stays solvent. It is like an annuity, in a sense, but with a higher yield and a greater ability to exit the investment.

Of course, the risk is on the flipside. If tariffs, governance problems, and runaway government debt lead to high inflation, and Treasury yields rise into the 6%... 7%... 8% range, these bonds with their extreme duration will be heavily damaged. You'd want to pair this bond with something that offers inflation protection, such as the stock itself, some  or a portfolio of consumer staples. 

Some might say there is also a risk of OXY being left behind by the shift to electric vehicles. However, oil demand is not actually declining yet. The bigger concern is OXY's 3-year trend of declining revenues, which could be made worse if tariffs / retaliatory tariffs create a situation where assets are trapped behind trade barriers.

But still, we're talking about 3 year trends and current events in the context of a bond that matures in 71 years. OXY isn't going anywhere anytime soon, and so these bonds might be perfect to help float a young FIRE'ee through the bond tent portion of the early retirement process.

[ChpBstrd]

Asset: UDN call option, 9/19 expiration, 15 strike
Price: $2.77 mid price (underlying is $17.64)
Rationale:
It's time for US investors to start doing something they've never done before: hedging the value of the US dollar. UDN represents the easiest way to do so, at a cost of a 0.75% expense ratio. The fund uses derivatives to track the inverse performance of the USD against six other major world currencies.

Possible catalysts include:

• Tariffs: a currency is worth what it can buy, and tariffs represent a tax on what the USD can buy.
• Crypto Reserve: Foreign investors may be unnerved by subsidizing a government that is using their treasury funds to collect cryptocurrency, or accepting taxes in crypto. Such a government might switch currencies and devalue the currency of their bonds.
• Massive Deficits: The coming tax bill will almost certainly expand the US's deficits by A LOT. How long until investors start fearing a devaluation?
• Governance Quality: People are buying Trump merch, staying at Trump hotels, and buying Trump/Melania crypto as a semi-legal way to put money in the hands of politicians. This is corruption, as is firing FBI agents, SEC regulators, and more. So why should foreign savers hold USD's instead of, say, British Pounds or Japanese Yen? Those governments are both far more honest than the US.
• Weak-Dollar Policy: The administration has alluded to policies such as affecting the Fed to push rates lower or cancelling treasury debts to certain entities (defaulting). Meanwhile, the erratic behavior has affected foreign investor confidence. A weaker dollar and high tariffs would be required to "bring manufacturing back to the US".
• BRICS Pay: Could negate the point of a world reserve currency and create a China-centric bypass.

UDN yields 5.25% and is up 5.19% YTD.

Unfortunately, options are only available out to September 19, so there are no straightforward ways to obtain a leveraged position to protect a much larger portfolio of, say, dollar-denominated bonds or dollar-earning stocks for years at a time. Look to the futures market for such a product, and understand its downsides.

But for the cost of 13 cents per share in time value, you can hedge your US dollar exposure for six months at a time, using the option I highlighted. More importantly, with the call option you profit if UDN goes up, but you only lose the value of the option if UDN goes down more than 17.6%. I doubt the US dollar will go up nearly 17.6% in the next six months.

IF the fund moved 1:1 with the US dollar*, spending 13 cents on time value to control shares at $17.64 would represent a 0.74% cost of hedging, every six months, or less than 1.5% per year. Of course, you could lose up to the entire $2.77 spent on the call, but the US dollar would have to rise about 17.6% for that to happen.

Disclaimer: This is exactly the sort of news-driven investment that did poorly last year.

*the fund uses quarterly contracts to track the USD over time, so the price may vary over longer periods of time due to contango/backwardization.

I came here to post this exact same idea again, and then remembered I'd already posted it. LOL.

Current mid price is up to $3.02, a 9% gain compared to when I first posted.

[BicycleB]

I'll get out of $RKT at + 20%, I'll get out of some bonds / rate hedges if/when equities look attractive again.   If we get a real market vomit (20%+), the treasuries should be going in the opposite direction then I'll pull the trigger.  If not, that's fine too.

@chasesfish - do you mean 20% above your purchase price?

For example, 14 x 1.2 =16.80… today’s close of $15.71 has me thinking!

I re-read my post and you're right, it doesn't make sense.

I think $RKT goes to $20.  I also bought some TLT and ZROZ as a hedge against rates dropping / softening economy. 

I won't reallocate my overall bond portfolio unless we see more than 20% off of the S&P.   I like the safety net at this point in my life.

RKT back above $15 ($15.40 at close last week), with interest rates dropping during the stock meltdown that followed Trump's broad tariff announcements April 2. Nice to have a stock that went up when the rest were nearly all going down!

[ChpBstrd]

Asset: EBAY common stock
Price: $62.60
Rationale:
A world of high tariffs has blown up the growth models for Amazon and WalMart. If the price of everything from China increases 50%, then consumers can only purchase 50% less of it. We might see acute shortages of things that can't be sold at volume at the higher prices.

If only there was a company that could get away with skirting around the tariffs. Hmmm... Ebay! In their business model, they are just a go-between connecting sellers and buyers and handling payments and tracking. They do not have to buy imports or pay the tariffs, as they are in the information business - not warehousing, retail, and shipping like Amazon and WalMart. Could this be the future of retail?

Yes I know Trump has promised to end the "de minimus" tariff exemption for small packages worth less than $800. He even tried to do so back in February, but was forced to pause the effort when it became clear the US government did not have the staffing to inspect over 1 billion small packages arriving through dozens of ports, land crossings, and airports. Then on April 2, he signed an unclearly-worded executive order saying the de minimus loophole was closed.

Well, signing the executive order does not make it so. Who is going to collect these tariffs on over a billion little packages from tens of thousands of overseas sellers? How many External Revenue Service agents need to be hired, trained, and put into sorting facilities so that they can look at tens of thousands of packages a day? How long will it take to establish effective enforcement, in years? And if a seller of a $100 item marks the item worth $5 to pay lower taxes, will the ERS agent open the package, inspect its contents, do an appraisal, and catch the culprit? Will the government send such packages back or hold them in giant piles at seizure facilities, and won't that piss off voters?

Bottom line: It's not happening for at least 2-4 years. Shippers can still avoid most tariffs on expensive things (components, auto parts, electronics, jewelry) by marking their packages low value. So that's what's going to happen. Meanwhile, shoppers will flock to small sellers on Ebay to order things for vastly cheaper than Amazon or WalMart can manage. Ebay is hands-off, and has plausible deniability. Amazon and Walmart.com are dominated by large corporate sellers who are purchasing and warehousing in bulk.

There are major risks, such as the US shutting off all international small package shipping until the ERS is established, or the ERS going after facilitators like Ebay, or additional EO's targeting ecommerce. But for now, Ebay is perfectly positioned to profit from the trade war. They happen to be perfectly set up to facilitate tariff runners

Ebay stats, per Yahoo Finance:
TTM PE ratio: 15.8
Forward PE: 11.8
Price/Sales: 3
Price/Book: 5.64
Profit Margin: 19.21%
Operating Margin: 18.57%
ROA: 6.87%
ROE: 34.29%
Debt/Equity: 152%
Current Ratio: 1.24
Yield: 1.86%
Payout Ratio: 27.34%
2024 Free Cash Flow: $1.956 billion
FCF/Market Cap: 6.75%

So Ebay is a actually deep value stock currently priced for continued low growth that might represent the near-term future of e-commerce.

It's a risky play though, as the small parcel trade is definitely in Trump's sights. But if Ebay can lay low, and if the political focus eventually shifts elsewhere, it's entirely possible for this pipsqueak of online retail to quietly double its sales and plow money into more buybacks.
 
We can worry, but Ebay's risk profile seems better than WalMart (PE=37.6!) or Amazon (PE=32.77!) who will be encumbered by idle assets and onerous regulations around proof of tariff payment in a future world of falling overall retail sales. EVEN IF all international small parcel shipping was shut down in some draconian move, or EVEN IF the ERS was stood up faster than any peacetime government bureaucracy in history, then Ebay would still be the future of e-commerce because we'd all be reselling scarce manufactured objects, clothes, and other items to each other domestically. A whole economy would pop up of people bringing back extra laptops, jewelry, fashion, and auto parts from cross-border trips to sell on Ebay and pay for the trip.

If buying the stock is too scary, you might go for the consolation prize of selling a put option at the $50 strike expiring May 16 (35 days) for about $1.28/share. That's a 2.56% return on the strike price in just over a month. Sophisticated traders might take a positive delta one-year position in Ebay and a negative delta position in WMT and AMZN, while accounting for EBAY's higher beta.

[ChpBstrd]

Asset: Bear call spread on BA at 170/175 strikes, 5/16/25 expiration
Price: $1.06 credit per share, mid price
Rationale:
Boeing has simultaneously lost the European and Chinese airliner markets, and probably more. This is a company that was already hemorrhaging money amid multiple quality scandals, and now they've suffered the amputation of much of their international business. Yet the stock has only fallen -12% YTD and -8.27% over the trailing twelve months, compared with the S&P500 at -8.64% TYD and +6.6% TTM. Commercial aviation accounted for 43% of 2023 revenues.

Bulls are hopeful the upcoming spending and tax bill will offer a bonanza of defense spending, and tariffs encouraging domestic consumption, but it seems more likely that BA's US production facilities have become trapped on an economic island, and the rest of the world and perhaps US carriers' foreign subsidiaries will be choosing from Airbus or China's Comac.

This is not even to mention the effects on BA's supply chains, or the chilling effect the chaos has on airline or foreign government purchasing decisions, or the possibility of credit downgrades or Fed action affecting interest rates on their ebt . 

Meanwhile Airbus has been operating at capacity for a while now with a large backlog, seems uninterested in adding capacity, and only gains pricing power from BA's misfortune. As a hedge on this bear spread failing due to overall market movement, one could buy Airbus shares (EADSF, up +0.28% YTD and -7.64% TTM). Comac might be the ultimate winner, but alas, it is not invest-able. A rise in airliner prices and a shortage of availability could coincide with recession fears that reduce demand overall.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

[ChpBstrd]

Assets: Portfolio of shipping preferred stocks, see below
Prices: see below
Rationale:
Markets may have overreacted in sending down shares of shipping and logistics companies. Maybe world trade is not coming to an end? The following preferred shares now sport intriguing yields, after falling to near 52 week lows:
TRTN/PRB - $24.12     8.33%
DSX/PRB -  $25.72     8.62%
SB/PRD -    $25.23     7.92%
CMRE/PRC- $25.34     8.36%
Note that 3 of these are above their callable price, which creates some initial risk. All their ex-dividend dates have passed, and all are profitable. These seem like tasty yields to supplement the fixed income portion of a portfolio, if you are optimistic.