The Railroad Rally Is Overdone

2021년 5월 14일

I was talking to a buddy of mine last weekend who works in lumber, and we were just chatting about the markets over some drinks. At one point in the conversation, we were talking about shipping, and he was mentioning that "you can't beg, borrow, or steal" (verbatim) freight traffic right now, because of the shipping situation at the port of LA. In other words, rail is seeing a huge temporary spike in demand as long tail covid shipping - related effects come to roost. Then and there, I had the idea to be short railroads on this hype, and I've been looking for an entry point ever since. I think we are in the right zone for a short, but I'm not exactly sure where I'd like to risk vs, and so I've settled on a 312.5 jan 4th covered puts trade yielding about 1.4%. Rails are low ATR, and i like it from a risk perspective - either I get to improve my price on a short trade, or my directional bias helps me make a great annualized return. Either way, I think the time is now (or very soon) to fade these.

2021년 5월 16일

노트

A quick update: Since everyone is wondering about the KSU bidding situation, it might not be the ideal candidate for most in this trade. The other rails are in a similar position - you can really take your pick.

2021년 5월 16일

노트

also PSA: This account was previously called "Pholesolus". I'm starting a research service, so give me a follow & get notified when I launch! I'm really looking forward to the stuff I'm going to be putting out over the next few weeks.

Cheers!