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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The Cherry Bomb
September 11, 2019
VGK is an ETF that tracks a broad range of European equities, of which about 23% are in British stocks.  It’s no wonder then, that it had its biggest daily outflow in nearly a year recently, coinciding with a spike in volume a few days ago, and has seen 1.4% of its assets leave in September. Thank you, Boris Johnson.  Or Jeremy Corbyn.  Take your pick.  So, what’s VGK doing up over 2% since the end of August?  I never took Europeans to be eternal optimists, and there seems to be enough uncertainty around Brexit to make me think the bears would be in charge.  But the British pound is rallying, too, and that’s helping prop VGK up along with a little stiff upper lipping in response to investors pulling out.  VGK’s 22% IV rank and overall IV of 13% would agree, and suggest smooth sailing for Europe ahead.  But Europe seems fractured enough now that even something small could rattle their calm, and that’s why a bear might consider a contrarian strategy for VKG.  If you are bearish, the long put vertical that’s short the 53 put and long the 55 put in the Oct expiration with 37 DTE is a bearish strategy that has a 62% prob of making 50% of its max profit before expiry and that generates $.25 of positive daily theta.

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Tom Sosnoff
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