As the NASDAQ chops around between 13,000 and 14,000 as I suggested it would during last Friday’s session in “A Countertrend Rally” ahead of Friday morning’s February Jobs Report at 8:30am EST, my attention is turning to Russia and the opportunity currently being presented by The Russian ETF (RSX).
RSX has lost about 80% of its value since the Russian invasion of Ukraine and is being left for dead amidst talk that it might even be shutdown. Assets in the ETF have declined from $1,324 million at the end of January to $85 million at the end of yesterday. When I see price action, panic selling and talk like that, I sense opportunity.
A quick glance at the holdings of the RSX shows a predominance of energy and mining companies like Polymetal (19.10%), Gazprom (10.77%) and Rosneft (8.23%). While these companies are currently being shut out of international markets, they possess valuable commodities the world needs, and the political situation is fluid and could change on a dime. While I am not a geopolitical expert and do not know the current condition of the fighting in Ukraine or the political realities, any kind of deesacalation would likely lead to a substantial relief rally in RSX.
I’m looking to speculate on such an outcome by buying May2022 RSX $10 calls which should be available for about $1 this morning based on the premarket action in RSX. Any deescalation and RSX could move into the mid teens resulting in a huge payoff. Of course, this is a risky bet so size accordingly.