I found this video on TikTok regarding WEAT, fertilizers, and potentially other plays.
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Has anyone looked into SQM? Seems like their main products are lithium and potassium nitrates (i think for fertilizers?) along with many other chemicals. Looks like their recent earnings went very well as their stock shot up after. Could we see more upside to this company as materials/supplies for agriculture continue to be affected by the conflict?
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Global famine sounds really scary. I don’t know macroeconomics well enough to comment on the validity of the video, but it sounds like we should go long on any of the commodity tickers in this forum thread…
WEAT, IPI, NTR, etc.
Watching this video now on the same topic, from MeetKevin: A Recession May be Inevitable - DO THIS NOW!! - YouTube
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probably old news but bullish on EU defence stocks
Also potential germany buying F-35’s could be big bullish news for LMT.
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This has helped me think of the larger scope of wheat commodities. All should be effected by the ukraine situation and inflation landscape.
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I wanted to think through the potential scenarios with RSX for the coming weeks and writing it down is the easiest to have it organised in my head, hopefully it helps others to make decisions too.
As we all know, RSX is halted indefinitely. What this means for us put holders is ambiguous at this moment and there are several ways this can go in the following weeks. There is a lot to consider, and the considerations may differ depending on what expiration, what strike put you are holding.
- MOEX
The first definite factor that should have an impact on the decision you will make is whether MOEX opens next week, or they will keep pushing the opening. We will have more information about this before the next expiration for sure. Why is this important?
Currently almost all holdings of RSX are suspended from trading, meaning RSX NAV is mostly frozen too, other than small overall movement. What happens when MOEX opens is also not clear currently.
Foreigners to Russia are currently banned from selling stocks on MOEX, even from closing their positions. Short selling is also prohibited. This means that selling pressure will be somewhat lowered, but it will be a bloodbath anyway, no question.
And here comes the part that is a little concerning to me if MOEX opens next week. RSX NAV is currently calculated by assuming a drop of 95.573% in the stocks traded on MOEX compared to 25 Feb. If on the opening day MOEX holdings drop 70% from 25 Feb, that would result in an increase of 578% compared to 3 Mar calculated market value in RSX. Ceteris paribus, this would increase RSX NAV from $87.9M to $133.1M or a NAV/Share of $1.39. Assuming a more conservative 50% drop in MOEX holdings, NAV/Share would be $1.76.
Now this doesn`t sound too bad, still way in the money for the puts most of us likely holds. There is also an argument to be made that some of these companies are actually worthless, if not in their fundementals, then because the Russian market is considered uninvestible, so a larger than 70% drop may be possible.
The following companies are included in the above calculation, if anyone hs time to research how they have been affected fundemantally due to the sanctions, and other considerations:
TRNFP
ALRS
MOEX
IRAO
RTKM
RASP
- London Stock Exchange
The next part to have the potential to have similar effects is the GDRs trading on the London Stock Exchange (currently halted from trading). This is more complex as there are more aspects to look into.
These are essentially certificates to allow easier access to foreing investments, that any holder can trade in for the stocks trading on MOEX. In a regular scenario these should be following the price of the stock trading on MOEX. Considering the current developments where foreign investors are not allowed to close their long position on MOEX traded stocks, it is safe to assume that it will be a least somewhat decoupled, as it is currently unknown how long this restriction would last after MOEX opens. There is also another argument, as to whether these certificates will be honored at all. With the exception of one stock, all of these have lost over 90% of their value since 25 Feb, the one exception lost 84%.
Based on these points, assuming MOEX opens, there are a couple of possibilites to what happens here.
2a. GDRs remain suspended without notice to whether they are being delisted or the halt is temporary. This would likely result in an increase in calculated NAV, as we can see that RSX calculates it with assuming movement in suspended stocks based on the movement of trading stocks.
2b. GDRs remain suspended, and announced to be delisted from LSE. This would result in NAV either keeping at current level, or likely losing the remaining value. Best case scenario
2c. GDRs resume trading together with MOEX. Prices of the stocks could be affected by their primary listed counterparts. As per above, if MOEX drops less then the avg decline in the GDRs since 25 Feb these could increase in value. While the restrictions and uncertainty will no doubt result in a lower price in comparison to their primary listings, there will be people who sees this as a extreme risk/high reward scenario.
For the sake of having numbers to consider, calculated below is the scenario where prices will be coupled with MOEX counterparts and MOEX drops 70%/50%.
In case of MOEX dropping by 70%, a full correlation would result in an increase of $300M in NAV, to a total NAV of $433M or a NAV/Share of $4.52.
In case of MOEX dropping by 50%, a full correlation would result in an increase of $531M in NAV, to a total NAV of $700M or a NAV/Share of $7.3
This is the worst case scenario in my head. I cannot imagine MOEX dropping less then 50% in the first day of trading, and I also cannot imagine GDRs fully correlating to their primary listing.
But would information come to the contrary, be prepared that mathematically, there is a chance that the last traded price of RSX would be a discount rather that the premium we are used to now.
- Timing
Considering there is a real possibility that come 11 March, we will have no more information than today, let`s walk through the hypotheticals.
My current understanding to what happens in case you hold puts and RSX is still halted:
You have a choice to make, you either exercise the option or let it expire worthless. Since to the best of my knowledge RSX is physical delivery settled, exercising your put contracts would result in receiving cash in the amount of your strike*100, and opening a short position of 100 shares. There are multiple scenarios here as well, and the above rough calculations are there to put a little extra considerations to help your decision making would this scenario come next week.
a. You hold ITM puts. Lets say you have $6 strikes, you exercise your put, receive $600 and have a short positions of 100 RSX shares. At last traded price of $5.88 you would likely be in a loss on your position, but still better off then not exercising, IF the price of RSX would remain the same, as you would get back some of your premium paid for the contract. If you don`t believe in the worst case scenario, this is potentially a situation where exercising is definitely worth considering, as at current price you negate losses.
b. You hold ATM/not too far OTM puts. Holding $4-$5 strikes are a little different story, as there is a higher likelyhood that NAV would reach up to this, but more importantly, exercising these would immediately put you in a negative P/L, as you would essentially have a short position with an avg price significantly lower than the last traded price. Not having enough funds in your account may result in not being able to exercise these, as it coul result in an instant margin call in my understanding. Why would you want to even consider exercising your OTM option? Would the best case scenario come, which is an announcement of the liquidation of RSX as well as delisting of GDRs and ADRs, should trading resume, a huge drop to around NAV is expected.
This is where you would need to be prepared for making decisions. Do you think NAV would drop below your strike? Do you think it is likely for RSX to liquidate? If your answer to these questions are yes, do you have enough funds in your account to open a short position against exercising? Are you even allowed to open short position in your account? Is RSX even available to short?
Lot of questions, some of which you have to decide for yourself, some of which you have to discuss with your broker well in advance of your expiry date to have time to act if there is anything you need to do in preparation.
c. You have far OTM puts. Hopefully most people have received the message of not taking on too many risks and not many have these. These are the most risky, and personally I would let most of these expire worthless if we have no news with basically the best case scenario. Even in a scenario where liquidation occurs, it is entirely possible and to an extent likely that the NAV will be higher than currently is. So holding a $1 or even a $2 strike would likely put your contract OTM of NAV.
Closing
Even though everything is halted, there is a lot of moving parts here. I didn`t talk about US listed ADRs, which are likely waiting on a further drop if they unhalt, or potentially delisting, these would likely lower NAV in any case. My intention with this was to present possible bad case scenarios, so noone is blindsided by hype. While imagining a best case is always nice, reality is not that simple. Think about your options, think what could go wrong, think about what you are risking.
As for my opinion, which is only that, an opinion. I find it unlikely that MOEX opens next week, unless some unexpected development occurs to the Ukraine/Russia situation. I don`t see a reason they would open now. The longer MOEX remains closed, the more likely RSX is delisted in my opinion. The ideal scenario for me would be MOEX not opening next week, ADRs GDRs delisting, RSX to announce liquidation, OCC to provide settlement price for options in advance of 11 March expiry. I dont think this is the likely scenario, but it would be ideal.
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Looks like it’s just a hiccup. Shifting to Chinese payment systems.
https://twitter.com/spectatorindex/status/1500368829805129729
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Interesting little read regarding BABA in Russia/Ukraine. Seems they are trying to lay low about interests with sanctioned companies, etc.
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I’m sure there is a lot of pressure from the Russian institutions to re-open the Moscow exchange, I’m sure they have options, short positions, futures, bonds, and everything else like ours so the longer it is closed the more damage is being done to their own economy as it freezes a LOT of business. It doesn’t matter if Russia takes over Ukraine, the sanctions won’t be lifted, I think Putin was/is trying to wait for some positive news (i.e. they take Kyiv) before letting the market re-open. There will be a mass sell-off no matter what, the Russian peoples’ confidence has been shattered, the ruble is quickly losing value, people will sell what they can and try to convert their money to something more stable so they can pay bills and buy essentials in the coming months.
I keep seeing more and more articles talking about oil and the magic $150/barrel number. Going to spend today looking at all the OIL & NG ETFs, try to figure out which have moved the most and which have the best option volume. Also going to see if there are other commodity ETF like WEAT & CORN with good option volumes.
As for RSX, I’m going to shoot off an email to Webull and see if they have a “designated credit risk
representative” like the OCC mentioned and maybe that person might also be able to shed some insight. Also even though VanEck gave me a copy-pasta email at least now I have a direct email address to someone and can try to get more info from them.
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One thing I forgot to account for is the fact that MOEX stocks trade in ruble and that also took a dive, which would mean a higher % drop of GDRs and ADRs, lessening the effect of the rebound I mentioned.
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Had this shared with me this morning, an interesting read/perspective from supposed FSB analyst
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Several Russian banks are switching to UnionPay which is a Chinese card system. Unfortunately UnionPay isn’t publicly traded, however, there still might be a play. Paypal (PYPL) announced a partnership with UnionPay in January of 2020. My plan is to watch the stock this week and see if this news does somehow impact their stock. Paypal did announce on Saturday that they are suspending their services in Russia so could end up being nothing but who knows.
https://www.reuters.com/business/finance/russian-banks-rush-switch-chinese-card-system-2022-03-06/
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Does anyone have or know where to get figures of visa and Mastercard revenue for the Russian region in 2021 or current? Contemplating visa and Mastercard for this loss of revenue, but to counter that rate increases in horizon could mean a pop in guidance on the the financing spectrum I suppose. Thanks
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@dooknukem looks like those LMT calls will continue to pay come Monday.
Chinese official reports winter wheat harvest ‘worst in history’
China’s agriculture minister reported over the weekend that the recent winter wheat harvest could be the “worst in history,” providing further justification to buy from Russia.
Minister of Agriculture and Rural Affairs Tang Renjian said rare heavy rainfall last year delayed the planting of about one-third the normal wheat supply, leading to a roughly 20% shortage in crop yield.
The war between Russia and Ukraine, which together produce roughly 29% of global wheat exports, had already pushed wheat prices to an incredible 14-year high.
The shortage could create food security issues for China, driving it to buy wheat from Russia. The two countries worked out a deal on Feb. 24 that allowed China to import wheat from all regions of Russia, which could provide Russia with greater funds for its war and further relief from devastating sanctions on its economy.
Russia attacks Vinnytsia airport with 8 cruise missiles
Ukrainian President Volodymyr Zelenskyy and Foreign Affairs Minister Dmytro Kuleba reported Sunday that Russian forces attacked a civilian airport with eight cruise missiles.
“Against our city, against our peaceful Vinnytsia which never posed a threat to Russia in any way,” Zelenskyy said in a video posted on Twitter. “A brutal, cynical missile strike has completely destroyed the airport.”
Kuleba labelled the attack as “barbaric,” and both officials renewed their calls for a no-fly zone over Ukraine.
The Russian Embassy in Israel pushed back on the reports by writing that the airport is “dual-purpose” and serves as a base of operations for the aviation brigade of the Ukrainian Armed Forces.
Russia’s credit rating cut again, close to default
Rating agency Moody’s delivered another body-blow to Russia as it set the nation’s credit rating at its second-lowest rung, putting the country in danger of default.
Moody’s said its decision to cut Russia’s rating was “driven by severe concerns around Russia’s willingness and ability to pay its debt obligations”.
Russia has kept its stock market closed over fears of a sell-off, which would crater the already vulnerable economy. The ruble dropped over 20% in the past week, with $1 equal to 124 RUR. Prior to Russia’s invasion, $1 was equal to 83.53 RUR.
VTB Bank Prepares to Exit Europe, FT Reports
Russia’s VTB Bank is preparing to wind down its European operations after being hit hard by sanctions, the Financial Times reported, citing people with knowledge of the internal discussions. VTB declined to comment to the newspaper.
“We’re trying to do it as swiftly as we can - but operations in Europe are much more complicated than those in the U.K.,” the FT reported a person involved in the planning as saying. “We’re doing everything we can to get customers’ money back to them.”
Sberbank, Russia’s biggest lender, decided to exit the European market last week. Together, Sberbank and VTB account for more than half of Russia’s banking market.
Blinken Says U.S., Europe Discussing Russia Oil Ban
The U.S. is in talks with European countries on a joint approach to any ban on Russian oil imports that could still ensure adequate supplies, said Secretary of State Antony Blinken.
Blinken, currently in Eastern Europe, said he discussed the matter with President Joe Biden and other cabinet members on Saturday.
“We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil, while making sure that there is still an appropriate supply of oil on world markets,” Blinken said on CNN’s “State of the Union” on Sunday. “That’s a very active discussion as we speak.”
Russian Lender Looks for Workaround to Visa, Mastercard Ban
Russia’s biggest lender, Sberbank PJSC, said it’s looking at the possibility of issuing cards using the domestic payments system Mir and China’s UnionPay after credit card giants Visa Inc. and Mastercard Inc. suspended operations there.
The move could allow Russians to make some payments overseas, since state-owned UnionPay operates in 180 countries and regions. Visa and Mastercard said that any transactions initiated with their cards issued in Russia will no longer work outside the country from March 10.
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Is anyone looking into SHEL as a potential play this week? Apparently they quietly bought Russian oil on a steep discount on March 4th, and a lot of people aren’t happy about it. I’m still investigating potential impacts on the stock price, but wanted to see if anyone else had eyes on it. Here’s a BBC article from this morning Shell defends 'difficult' decision to buy Russian crude oil - BBC News
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I’d be a little hesitant to take a sentiment based position on it considering the steadily increasing costs of oil. They’ve also committed to sending those profits to a Ukraine Aid Fund. It might not be a bad sentiment hit they take on Monday considering those two things. Oil companies (XOM, for example), have been steadily climbing since this whole fiasco started.
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A bit outlandish but Something I’ve been seeing these past few days is news articles saying that Coca-cola is still doing business in Russia, I think there could be negative sentiment building and considering Russia has just shelled an evacuation route during a ceasefire I don’t see that getting any better. We could see an announcement soon that they will no longer be doing business in Russia, looking at the chart they’re trading pretty high right now.
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There’s been news of a few large corporations still doing business, but I would bet the “cancel culture” will continue this week with more and more big names cutting ties with Russia.
The sentiment over anti-russia business like with Shell or Coke I think won’t amount to a hill of beans compared to the continued large price movements we will see in commodities, defense companies, and shipping.
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