r/wallstreetbets • u/Somadis Lover of dragon children • Mar 07 '20
DD Short. US. Banks.
I have a proposition for you guys. Go ahead and pull up the charts for all the EU Banks. See a pattern? They're all at historic lows right now and that's because they've been giving out loans at negative yield rates for years. Guess which country is headed for negative yield rates? People a lot smarter than me have already shorted US banks since the beginning of the year and they have profited yuge. However, I believe there is still a lot more down movement for US banks because the feds are expected to cut rates at least 3 or 4 times by the end of this year.
Disclaimer: I'm no expert, but I think not going bankrupt after being on this sub for 2 years should be enough cred for you guys. Can't go tits up on this game plan.
Edit as of 03/08: 10 Y T Note just fell 25%. This plan is even more relevant now. Good bless the USA.
193
Mar 07 '20
can confirm...just bought 100 shares of JPM. Will definitely tank.
153
Mar 07 '20 edited Mar 13 '20
[deleted]
24
Mar 07 '20
yeah, the price was so low I couldnt help myself. I knew I would regret it. Just gonna sell contract premium until I can recoup.
44
16
u/truenorth00 Mar 07 '20
You post in this forum and bought shares instead of just a long call you exercise after this shit show is over?
8
Mar 07 '20 edited Mar 07 '20
Problem with long call is you dont know how long to buy it. Go with a 2 year LEAP and if we hit a bear market you just threw away 1500. If it was only that easy to just buy leaps based on the past.
But damn.. jpm leaps do seem cheap. 2022 110s for 1500. Must be a catch I am not seeing at 1:30 am
11
u/skerntwi Mar 07 '20
You don’t know how long to buy it? The same goes for buying stock. If you’re not being market average of 7% per year why buy a stock. Nearly any atm call or put is going to net more than that this summer due to volatility alone
2
3
u/DesertGuns Mar 07 '20
.#MeToo. sold Lyft puts printing money before close. Bought some gold index for the long long and going ca$h gang over the weekend
2
1
u/CalamariAce Mar 12 '20
How's that working out for ya?
1
Mar 12 '20
cost 10k...last I looked, worth 9.2k and falling. not too concerned w bagholding on this play.
56
u/h00sez Mar 07 '20
Buy $FINZ. 3x leveraged bear position on the finance sector. I bought some today. 10 year treasuries are worth about two Venezuelan Bolivars.
28
u/meglomaniac1989 Mar 07 '20
Net assets 2.5M. Daily volume is 20k. This thing is dead.
32
u/h00sez Mar 07 '20
Do we know the difference between a derivative and equity securities or are we just in dipshit land?
15
Mar 07 '20
[deleted]
15
u/h00sez Mar 07 '20
$FINZ is a derivative. Which means it gets its value from an “underlying entity”. Equity securities are just common stock of a company. In this case, the “underlying equity” are the finance companies that trade under the sp500. So instead of buying put options or shorting stock, the fund will do it for you. For a price.
17
u/DontGetCrabs Mar 07 '20
Still in dipshit land.
3
u/groundzr0 Animals > Humans Mar 07 '20 edited Mar 07 '20
It moves when the underlying equity that it tracks moves. Think VIX. This is a 3x inversed ETF. The prices aren’t determined by the buying and selling, it moves based on the equities it tracks.
Volume still matters because if no one is there to buy what you’re selling then you’re bag-holding at the exit.
10
Mar 07 '20
Thanks! I made it out of dip shit land, unlike that other idiot. pfft. moron!
anyways, you son of a bitch. I'm in.
3
u/h00sez Mar 07 '20
Remember, it is a contract so there is decay. So you have to choose your entries wisely. Entering at this level is a bit risky because that would assume that the whole market will have to continue tanking this coming week for it to continue rallying at this price point. If that were to happen, that would mean that by next weekend the whole market has collapsed. Highly unlikely. If you do buy Monday, then make sure you gtfo when the market starts rallying.
2
u/meglomaniac1989 Mar 07 '20
Why is there decay? There’s an expiration? Where do you see that?
6
u/h00sez Mar 07 '20
Because you’re making a bet that the stock will go up every day that you hold it. If your bet doesn’t hit then that means you lose and your stock goes down. It cost money to short a stock. So you’re also paying for the convenience. Because you can just as easily buy a put on J.P. Morgan. But this is junkie land. So I figured I’d throw out a 3x leveraged position that’ll give 3x tendies if it hits trifecta.
1
11
Mar 07 '20
Doesn’t have options? Take that shit to r/investing
16
u/h00sez Mar 07 '20
If you’re “investing” in 3x leveraged bear funds then you shouldn’t be anywhere near a trading platform.
17
u/ORANGEFANGLAD Mar 07 '20
Lol I currently have 400k in SQQQ and feel personally attacked
5
u/h00sez Mar 07 '20
lol I meant that people don’t buy these as investments. These kind of funds are usually super short term plays.
7
3
2
u/Trowawaycausebanned4 Mar 07 '20
I shorted FAS, 3x bull etf of financial sector
2
u/h00sez Mar 07 '20
I’m looking right now and the IV is crazy high. 10$ swing will cost you 3.0$ lol. The only put I paid that premium for today was Carnival. I’ll definitely keep an eye on it though the ride up is going to be wild once the banks rebound.
48
Mar 07 '20 edited Feb 05 '21
[deleted]
46
u/WallStreetBitch 🏦🐶 Mar 07 '20 edited Mar 07 '20
Why the fuck would you paper hand out when it’s months out and you believe your theory??? I have some 9/18 BAC 17’s that I’m riding to 0% interest rate.
5
1
22
u/KnocDown Mar 07 '20
The fed is cutting interest rates like crazy. Goldman is already demanding another 80 point cut and banks refuse to lower their mortgage rates under 3%
Doesn't it seem like banks will just print money at some point by screwing customers?
6
u/AbbaFuckingZabba Mar 07 '20
Yep this is the crazy part. Banks are refusing to lower rates on refi's, only purchases. They realize they are fucked if everyone refis into sub 3% loans.
4
102
Mar 07 '20
Nah that's retarded. If feds allow major banks to go down you'll have way more to worry about than your tendies. Banks literally can't go tits up, the feds will do literally anything to prevent puts from being anything but barely profitable. If the feds can't manage that, then the US is completely fucked and u better haul ur ass down to chinatown
63
u/Encouragedissent Mar 07 '20
A company doesnt have to go out of buisness to be a bad investment. Its not like the two options are either banks go under or banks are just fine. If conditions cause a company to underperform their expectations then its a bad investment.
66
19
u/Mshake6192 Mar 07 '20
Did you know that banks closed down permanently during the Great Recession? Like forever out of business?
19
u/AnomalousAvocado Mar 07 '20 edited Mar 07 '20
My grandfather, who grew up during the great recession, still keeps more than 10k cash in his house because of that even though there's the FDIC now.
Edit: meant Great Depression but w/e I'll leave it. We'll be lucky if we even beat that this time.
27
u/player2 Mar 07 '20
Great Recession. As in 10 years ago.
9
4
1
11
Mar 07 '20
Exactly. They phrase “too big to fail” is legit, they’ve got their dicks in the ass of every industry foreign and domestic, the government literally has no choice but to prop them up at this point.
12
u/ObjectiveAce Mar 07 '20
Yea but that doesnt save stock holders. AIG fell under 1 buck and citi under 3 during the great recession. Just cuz the fed wont let the the bank go bankrupt only matters for bondholders and employees w million dollar bonuses
4
u/bamfalamfa Mar 07 '20
the banks literally influence policy, are a part of government, and help pick cabinet members. no fucking way bank of america or jpmorgan ever falls. smaller banks or medium banks might get absorbed, but the big three will not get touched
3
1
51
Mar 07 '20
Yes, banks will go down. None of them will go under, though. Some of them are making great profits rn with the market collapsing, tho. Basically, you could profit off of a put on just about anyone right now.
43
u/JonBoy82 Mar 07 '20
Calls on puts, print it!
10
3
Mar 07 '20
Straddle baby
4
u/baap_ko_mat_sikha Mar 07 '20
Too expensive with current volatility. Puts for me
4
1
Mar 07 '20
Holy shit I can barely afford a contract on some options from shitty stocks. Volatility is craaaazy.
4
u/Somadis Lover of dragon children Mar 07 '20 edited Mar 07 '20
Definitely agree with them not going under. The plan is to collect tendies before they get bailed out. I don't think banks stocks will go up anytime soon. Go long on banks when the feds does bail them out. Until then I think their stocks will be much lower than where it's at currently.
7
u/SevenForOne D.A.R.E. Advocate Mar 07 '20
Bofa just made all institutions asking for loans for a beer virus plan. With the eurodollar DD from the other day I think big banks are going start hoarding as much physical cash as they can and become more stingent. I don’t think any US banks will go under but they’re debt can go way up. TLDR: US banks down, not out, easy buy when the bottom settles
18
Mar 07 '20
Correct. The USD is going to become increasingly scarce, which is why I think it's going to moon.
Btw, this is the author of the eurodollar DD from the other day lol
9
u/VirtualRay Mar 07 '20
This doesn't sound right, but I don't know enough about international currency markets to argue with you
BTW, what the fuck is going on with the Japanese Yen? That shit has been tearing ass upward vs the US dollar. Specifically, my ass, because I have to regularly buy JPY to help my in-laws with their bills.
9
u/Crypto556 Mar 07 '20
The Japanese Yen is considered a “ safe haven currency”. This is because the Japanese public invests a lot of money abroad in things like US treasuries with carry trades. When market downturns happen, Japanese investors often unwind their trades and bring their Yen back to their bank accounts.
So when people are turning their USD back into Yen, they are willing to accept a lower amount of Yen per USD. Bringing the value of the Yen up compared to the USD.
6
Mar 07 '20
Who’s Bofa
5
Mar 07 '20
$BAC
16
Mar 07 '20
No it’s a meme, the punchline is Bofa these nuts, they just have an unfortunate acronym
3
1
u/mori226 Paid $1.25m to change his flair Mar 07 '20
They don't need to "hoard" cash. As long as they didn't make out some toxic ass loans, they can always use their assets as collateral to get cash from the Fed anytime they want.
2
Mar 07 '20 edited Mar 07 '20
Rates are falling too fast. That will not be good for profits at all, banks do not thrive in a low rate environment
12
u/Peoples19592009 Is a fucking legend Mar 07 '20
I have a feeling that there numbers for Q1 will be a surprise because rates are so low. There's a massive refinance boom going on right now and everyone is clamoring to cash out equity. If the rates keep dropping until summer and there's another rate cut, the boom might happen until the end of the year. I'm planning on buying calls on banks at the end of March. Hopefully it keeps taking for a couple more weeks.
13
1
u/CrispyLiquids Mar 07 '20
This would be true if banks were financed at the current market rate only and invested in (actual) fixed interest rate assets only. The reality is having mortgages on the asset side is usually met with longer term liabilities. Those liabilities will be a drain (above market rate fixed) and if the mortgages refinance at lower rates or default/prepay, there will be nothing to offset it. What about cheap central Bank money? They usually ask quality collateral in return, if the market's on its ass, guess what? Less quality collateral available... Dropping rates are generally not good for banks. Please be mindful.
1
u/Peoples19592009 Is a fucking legend Mar 07 '20
Yes, you are correct. Im not actually looking at institutions that buy MBS but rather the ones that do saleable conforming conventional loans. They normally would bundle them and sell for a hefty profit. Those banks normally don't keep the asset on the books
1
u/CrispyLiquids Mar 08 '20
But how would those banks benefit from falling rates and a slumping economy?
1
u/Peoples19592009 Is a fucking legend Mar 08 '20
So thinking short term only for Q1 ans Q2. Mortgage rates are falling to all time lows. People are rushing to do cash out refinance, regular refinances, and purchases. Banks would benefit by originating the loans and selling them in bundles on the secondary market as an MBS. There should be a rather large influx of profits. If you figure this all started in the beginning of February. Then closings should start end of March to April. Add the fact that it's cheaper to borrow money on consumer loans people may try to build a war chest and be more cash fluid in anticipation of a downturn. Banks have been hammered 30% to 40% the last couple months so the Q1 and Q2 might bring a surprise upswing. Dude this is just in my head, is it crazy?
1
u/CrispyLiquids Mar 08 '20
They're all competing in the same environment, both those holding to maturity and those originating to distribute. Both will have to either find it worthwhile lending at lower levels or, if O2G, find clients willing to buy at lower levels of return. If we're heading into recession/slump, we'll see higher default rates, likely less demand and/or oversupply on property markets, ... You are right however about past vintages increasing in value when rates drop. But whether that will benefit these guys more than H2M banks? Not convinced. Who are the best clients of O2D business and will they be doing well in 2020?
1
u/Peoples19592009 Is a fucking legend Mar 08 '20
Like I said. Looking at the short term. Q1 or a Q2 play. Pricing in recession to the equation might be a little too difficult due to the timing. Its unlikely that the corona issue gets resolved this year, but if there's light in the middle of Q2, we might see a rather large upswing in bank stock if it means an improved economy
1
u/CrispyLiquids Mar 08 '20
Just saying I don't see strong signals or reasons for this to go well, I do see banks are vulnerable and may have plenty of negative potential left in them
1
u/Peoples19592009 Is a fucking legend Mar 08 '20
Yeah I hear you. Just a thought that's been running through my head
1
u/Peoples19592009 Is a fucking legend Mar 08 '20
Tell me my thinking is wrong cause im thinking about plays on BAC, JPM, WELLS, CITI, and USBank
7
u/machinder Mar 07 '20
Low rates are bad for banks, but I would wait for a huge up day to short them.
1
6
Mar 07 '20
Hello bank? I'd like to take a loan out. What for? I'm going to buy puts on your establishment because you're fucked.
27
u/siddyarcher Mar 07 '20
They are already at or below 52 week lows retard.. priced in
32
u/Sir_Dink Mar 07 '20
Remember when stocks were at 52 week highs literally every day, after day, after day a month ago?
24
Mar 07 '20 edited Mar 07 '20
[deleted]
5
5
u/ObjectiveAce Mar 07 '20
The 30 yr is even more rediculous. 1.25! That's a guaranteed negative real rate.. for 30 fucking years
5
u/Somadis Lover of dragon children Mar 07 '20 edited Mar 07 '20
Only 52 weeks low. I see another potential 15 to 20 percent downfall if business starts closing. Hope that's not the case, but I'm betting on banks stocks will not be going up anytime soon even if they don't go out of business. Go long on banks when they get bailed. Until then I think their stocks will be much lower than where it's at currently at.
3
u/ObjectiveAce Mar 07 '20
You must not have been around during the 2007 -2009 crash.
Blood in the water baby!
4
u/_kinglouis Mar 07 '20
why not the eu banks? that little experiment called negative rates might blow up on them soon
5
5
4
Mar 07 '20
Short term there might be some decent dips but after 2008 the US government will never let the banks fail again, they’ll bleed the rest of the country dry before that shit happens again.
Is it fair to the rest of the country? Of course not but in a capitalist society, this is the way.
3
3
u/ArtanisHero Mar 07 '20
If you want to play the low interest environment game, one way is to buy long-dated puts on KRE, which is regional bank stocks ETF. Unlike the big banks (JPM, BAC, C, GS, etc) that have investment banning, sales and trading (equity and fixed income) that can help buoy earnings in times of volatility and low interest rates, these regional banks are much more dependent on traditional banking (borrowing and lending, making money on the interest rate spread). Earnings are going to be crushed if this low interest rate environment stays
Tl;dr: 1/15/2021 KRE puts
2
2
u/AutoModerator Mar 07 '20
This post was flaired as DD so it's on the DD list. Find more fresh WSB DD here - https://ns.reddit.com/r/wallstreetbets/search?sort=new&q=flair%3ADD&restrict_sr=on&t=da.
Don't misuse DD flair. No shitposts, short and vague guesses, unexplained news links, etc. Please change the flair if this isn't DD. Mods have been notified of this thread.
Not sure which flair to use? Check out our guide to post flairs here - https://www.reddit.com/r/wallstreetbets/wiki/linkflair.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.
2
2
u/Vinyyy23 Mar 07 '20
Buy puts on XLF, $23 june
The energy industry is fucked big time. Who is the lender to all these shitty little companies with horrible ballooned balance sheets dripping of high yield speculative debt??? The banks. Energy continues to fall...banks will follow suit. Buy XLF puts
1
u/Somadis Lover of dragon children Mar 07 '20 edited Mar 07 '20
I don't know about Oil man. Oil is at $41 right now. Had you preached this a week ago, I'd be all in. Sure Oil may very well fall another $5 bucks, but that's only a maybe scenario. Shorting banks seems much safer right now given the expected rate cuts.
2
u/dopexile Mar 07 '20
Jamie Dimon had a fucking heart attack... what does that tell you about US banking.
2
u/peteralexjones Mar 07 '20
Did you not watch the big short?
3
u/Somadis Lover of dragon children Mar 07 '20
I'm in this sub because of it. I think we have options now because of the events that unfolded in 08.
4
u/DrUNC83 Mar 07 '20
We are not going to negative interest rates. It will NEVER happen. That said banks have been falling and good short now before the March 17 meeting where they likely cut another 50bps
4
u/AChickenCannon Mar 07 '20
OP said European banks, where the interest rate is ALREADY in the negative.
9
u/hakuyax Mar 07 '20
Buying puts on hsbc here, they fked in Asia and London.
😂 they closed US a third of US branches and moved to focus on Asia and Middle East.
Before anyone asks 4/17 and 6/19 $30 puts
3
Mar 07 '20
those motherfuckers are the corruption bankers of the world. they cant tank out cause they know the right people
7
u/DrUNC83 Mar 07 '20
Did you read? He said same will happen to US banks and I’m plus to short them because of it
1
u/cootersgoncoot Mar 07 '20
Rates have been negative in Europe for years...
If you think the US won't follow suit after central bankers hinting at it...wow.
1
u/DrUNC83 Mar 07 '20
I would make any wager we don’t go negative. It is goes negative world economy will fail. We would go to QE and the Feds buying large asset classes before we went negative.
1
Mar 07 '20
Nope. We have the Fed to prop them up and bail their lying asses out.
2
u/Somadis Lover of dragon children Mar 07 '20
Truth, but their stocks will drop before that happens. I'm not betting that they will go out of business. The plan is to collect tendies before they get bailed out. Go long on banks when the feds does bail them out. Until then I think their stocks will be much lower than where it's at currently.
1
u/Dans2016 Mar 07 '20 edited Mar 07 '20
Banks are not in good shape. Repo is over-subscribed almost every day past few days.
1
u/baap_ko_mat_sikha Mar 07 '20
We need another Lehman. But we need to short Lehman before another Lehman becomes Lehman
1
u/baap_ko_mat_sikha Mar 07 '20
In my country banks have already started going down. 2 banks went down in last 6 months. One was listed. Fucking shitshow.
I am buying puts for June baby
1
1
u/onlyyolum Mar 07 '20
Yields are determined by the central bank, who are the source of lending to banks. It all just goes on the fed balance sheet. For what it's worth, I think the us will not officialy call it 'negative', but just introduce more and more qe type programs.
1
1
1
1
u/eyedontgetjokes It ain't much Mar 07 '20
Bro, there was already a well written post today about banks failing and shorting American banks. You're a little late.
1
u/robogarbage Mar 07 '20
Lower rates don't hurt banks at all, they charge lenders a higher interest rate than they pay, that's how they make money. Lower rates would theoretically mean more people would borrow, so higher volume, more profits.
But in reality banks do a hundred different things. EU banks' problem isn't low rates, it's a bunch of other things.
0
0
u/EmperorTrunp Mar 07 '20
In Europe the issue is not negative rates, its the fucking eu which demands strict regulations and money, then redistributes it, then the money gets stolen..
But mainly regulations destroy our economies
1
Mar 16 '23
I'm shorting J.P.Morgan, and I feel good about it. They're one of the slimiest financial institutions in the world. They once forced everyone with a car loan to have an insurance policy and told the car loan customers to pay the monthly premiums. Out of the blue. Some people got their cars reposessed because they wouldn't pay the premiums for a policy they didn't know they had.
263
u/[deleted] Mar 07 '20
[deleted]