NaughtyPines

TRADES TO MAKE IN PREPARATION FOR A BREMAIN RESULT

FX:GBPUSD   British Pound/U.S. Dollar
I don't trade news, but this is an event whose outcome I think is now relatively certain (Bremain) such that it might be worthwhile to take a small position to take advantage of the relief rally that will occur if that is the result. Naturally, I could be totally wrong on the result, but the probability of a Bremain vote is currently higher than a Brexit vote, if the bookies have anything to contribute to the discussion ... .

In any event, here are the ideas, roughly in the order of my preference:

1. Gold             Short. Gold             is again butting its head against the psychological 1300 resistance level here, and its been sideways between 1200 and 1300 since mid-February, having previously unsuccessfully challenged the +1300 mark in early May before giving up the ghost all the way back to 1200 by May's end. A meaningful relief rally in equities on a Bremain vote may guide the precious metal lower.

Because I'm currently in a GLD             position, I've chosen to close the put wing sides of my GLD             iron condors, leaving short call verticals in place to take advantage of any downturn. If the short call verticals don't hit max profit outright, I'll merely wait and buy the dip by adding the short put wings back in if there's a significant drop in price.

Trades: GLD             or GDX             short call verticals above current resistance.

2. TLT             short/TBT long. Traders have fled risk-on assets a little bit here in advance of the referendum. As with gold             , they've sought out safe havens such as treasuries, driving TLT             to within 5% of its 52-week high and TBT             to within 5% of its 52 week low ( TBT             is the inverse of TLT             ).

Trades: TLT             short call verticals above current resistance; TBT             short put verticals below current support.

3. European Indices/Index ETF's Long. Naturally, you can play US equities indices long here, but since this is uniquely a European "thing," I would think you'd want to put plays in European indices or index ETF's to get the full brunt of the relief rally and not the spillover that will occur into US markets. Although the Euro             index ETF's have already experienced a bit of resurgence off of lows, they may have further upside once the referendum is over.

Trades: EFA             short put verticals below current support.

4. Cable Pairs. GBPUSD             is the most obvious choice for a bullish assumption, although it's already rallied from the 6/16 low by 200+ pips, although it may have another 350 pips to the upside in it (the 5/26 high).

In all of these instances, I would trade small and, if trading the underlyings directly, I would common sense in setting stops. Keep in mind that all these assets are likely to move "in tandem," so I would pick one to trade and not put on trades in the others. The reason my preference is for a gold             trade is that (a) it's a mover; (b) it's already at resistance; and (c) well, to be honest, I've already got a GLD             trade on that I can use to take advantage of the movement.
Comment: Glad I opted for the GLD short. It's had the most movement out of all the suggestions ... .
Big question is whether there will be a relief rally starting Friday after the referendum or the Market already discounted the Brexit by rallying this week.
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Yep. Which is why I'm mostly flat here. Naturally, if there's a relief rally, I think it will be biggest in the European markets; it will be more muted here. Also, "rally" is relative; how relieved are the markets going to be? 1% relieved, 2%? Hard to say ... .
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My basis for thinking that it will be "Bremain": http://www.mirror.co.uk/news/uk-news/eu-referendum-betting-brexit-odds-8182872 There is a bit of debate regarding whether bookmakers' odds are better predictors of outcome than polls. Obviously, the companies and/or organizations that make money from running polls argue that what they get paid big bucks to do is still "valuable" ... .
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