I am not sure whether the probability of almost everybody getting COVID is the thing that matters most for the markets. The important question is what the reactions in different countries will be, what new or extended restrictions will be in place. I think there could be a reaction especially in leisure/travel, maybe in energy, too. I plan to sell my position in an energy ETF on monday and plan to buy back when the new virus strain and its political consequences have become obvious in a couple of weeks.
If I were placing one of the bets I would likely bet against travel. It’s recovered the most so likely has an easier drop; nice big spike in November. I would not go out too far as I think this will likely be something that has to happen sooner rather than later—I don’t think the trade is a slow burn type potential. Either you’re going to see a move to say 22 quickly or options are not really a good vehicle for the trade.
I have not looked at of follow that ETF nor have I been closely following the industry. I would note a potentially unrelated item. The Philippines was planning to reopen schools in some of its provinces after the Christmas break. The administration just announce that has been suspended due to the new strain of virus. One might think similar concerns and thinking about the new strain would have an even larger impact on international travel and certainly any nonessential travel.
I have a quite bad track record with options trading, anticipating the correct direction but loosing because of wrong timing. (Therefore I will reduce the equity part of my portfolio but hopefully refrain from buying put options this time).
If I had to trade one of the three, then JETS, expiration in late March. (But I won’t and this is definitely not meant as a recommendation.) I think in three months time it will be sufficiently clear for the market if the new virus strains have a heavy impact—writing from a German/European perspective where I anticipate a prolonged hard lockdown if the virus is as infectious as feared. The US reaction is much harder to anticipate for me.
Winter is coming (hah!) which will mean more heating. That could well have been priced in already, but probably not all of it. Two potentially counteracting forces make it hard to predict what might happen. Also, -if- you’re going to travel you want to do it with your own car and not with public transport so there is a story where gasoline use actually increases. Finally, aren’t oil prices mostly supply driven?
I am not sure whether the probability of almost everybody getting COVID is the thing that matters most for the markets. The important question is what the reactions in different countries will be, what new or extended restrictions will be in place. I think there could be a reaction especially in leisure/travel, maybe in energy, too. I plan to sell my position in an energy ETF on monday and plan to buy back when the new virus strain and its political consequences have become obvious in a couple of weeks.
Some options and their 1-year charts:
JETS—Airline ETF
XLE—Energy and oil company ETF
AWAY—Travel tech (Expedia, Uber) ETF
Which would you buy put options on, and with what expiration?
If I were placing one of the bets I would likely bet against travel. It’s recovered the most so likely has an easier drop; nice big spike in November. I would not go out too far as I think this will likely be something that has to happen sooner rather than later—I don’t think the trade is a slow burn type potential. Either you’re going to see a move to say 22 quickly or options are not really a good vehicle for the trade.
I have not looked at of follow that ETF nor have I been closely following the industry. I would note a potentially unrelated item. The Philippines was planning to reopen schools in some of its provinces after the Christmas break. The administration just announce that has been suspended due to the new strain of virus. One might think similar concerns and thinking about the new strain would have an even larger impact on international travel and certainly any nonessential travel.
I have a quite bad track record with options trading, anticipating the correct direction but loosing because of wrong timing. (Therefore I will reduce the equity part of my portfolio but hopefully refrain from buying put options this time).
If I had to trade one of the three, then JETS, expiration in late March. (But I won’t and this is definitely not meant as a recommendation.) I think in three months time it will be sufficiently clear for the market if the new virus strains have a heavy impact—writing from a German/European perspective where I anticipate a prolonged hard lockdown if the virus is as infectious as feared. The US reaction is much harder to anticipate for me.
Leisure / travel I get, but why would energy be especially impacted?
I was primarily thinking about energy use for transportation falling even more than before, hitting the oil price. But I am not sure about that.
Winter is coming (hah!) which will mean more heating. That could well have been priced in already, but probably not all of it. Two potentially counteracting forces make it hard to predict what might happen. Also, -if- you’re going to travel you want to do it with your own car and not with public transport so there is a story where gasoline use actually increases. Finally, aren’t oil prices mostly supply driven?
Why not?