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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
August 13, 2019
You have to give the people of Hong Kong credit for one thing:  they have guts.  As China sends a convoy of armed police to a city bordering Hong Kong, protesters flood the airport and shut it down.  Despite the increasingly ominous tone of the China’s communist leadership, capitalist Hong Kong is standing firm against the mainland.   But both parties are in a tough spot.  Sure, China could wipe them out.  But the risk to the economy in doing so could be too great.  That, and where would the Party muckety-mucks buy their Gucci without a 10-hour plane trip?  Nevertheless, the market is still spooked by Hong Kong.  EWH, the Hong Kong ETF, has dropped the equivalent of 4 standard devs in the past three weeks, but it’s still basically unchanged for 2019.  With a 75% IV rank and 4-star liquidity, EWH could be an interesting candidate to sell premium, and a contrarian might consider a bullish trade.   If you combine those two, the short 21 put in the Sep expiration with 38 DTE is a bullish strategy that has an 88% prob of making 50% of its max profit before expiry and that generates $.95 of positive daily theta.
 
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Tom Sosnoff
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