Bought to close EWU

action

Bought 1000 shares of EWU at $14.7362. This closes the short position originally entered on 6/21 at $16.40. Total return less commission was $1647.9. Return per share after commission was $1.6479.

rationale

The EWU short is one portion of a synthetic put I entered into on Thursday, to protect my positions in BBVA and AV against the (seemingly) unlikely event of a Brexit. The other portion of that trade, (the long calls, which cost $592.95 incl. commission) will most likely expire worthlessly.

On Thursday I had estimated that the total protection afforded by the original trade would be $930. While the drop in EWU actually exceeded my expectations, I did not anticipate that I would have to cover the dividend that happened to fall right into the weekend while I held the short position. This will reduce the total return by $397.50. Assuming that the calls are now worthless, the position has delivered about $650 in overall return.

Holding on further doesn’t seem to make sense. I think the massive drop in the British pound may be come to be viewed as a competitive advantage for UK companies. The ripples of the Brexit vote will now spread outward, and most likely affect the European and US markets.

Theoretically there is a chance that the long calls could recover. But that possibility seems remote, right now. But since they are currently not bid, I can’t close the position.

June 24, 2016 at 4:58pm · EWU · buy to close · stock


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