Is Pelosi A Good Investor?
Strategy to benefit from Nancy's trades
California Democrat Nancy Pelosi has once again been criticized on social media. This time because some of the purchases she made in the options market have been made public again.
This woman was rated as the sixth highest net worth person in the White House in 2018. Her net worth was valued at +$114M. This made many people puzzled how a person who has dedicated much of her life to politics has been able to have these amounts of money. The answer is not simple. What is certain is that her husband has had close contact with several Real Estate businesses, and this money belongs jointly to both of them.
Regardless of how she got his money, what has really been criticized in social networks is that these types of people have access to information that is often confidential and that this information cannot be used for profit.
We are not here to judge whether this is fair or not. We are simply going to inform you of a series of trades she has made that can be quite interesting. So you can either waste your time criticizing it, as the poor majority of the population does, or learn from it, as a few of us do.
The trades that have been posted have been:
These are CALL contracts bought on Apple and Microsoft, very ITM contracts, and this has made many people think that, in a sense, these are bearish moves.
What most people do not take into account is that they are long-term bullish. Nancy is not an algorithmic trader but a woman who knows certain decisions that are going to be made from the top that can significantly affect policy in the short/medium term (3-12 months).
She is saying with these purchases that these stocks will be trading in early 2023 at a higher price than they do today, regardless of whether they can continue to decline.
This could be for a number of reasons:
Rate hikes were not as aggressive as expected.
New inflation data has been maintained/lowered.
China reopens its ports.
It starts printing money again and injects liquidity into the markets.
In addition, the purchases it makes are somewhat asymmetric since even if it loses the premium, the potential returns are brutal.
In the case of the first purchase in the report, she is buying with $1M, approximately 140 Apple contracts, which gives him the right to buy 14k shares. If she had done it directly at market price, she would have received "only" 6.6k shares.
Buying very ITM CALLs generally makes you lose money in the long run because you lose the premium. However, if you have some kind of information, it makes you can profit.
What has happened since the purchases?
The best market timing in history, +6% in 10 days. From our point of view, this has been a random thing, and it is possible that the shares may even continue to fall.
What has she done on other occasions?
A person with a net worth of $100M and self-made is not luck. It is that she knows what she is doing and how money works.
The main purchases she has made have been the following:
$1-5M in TSLA options
$5M in GOOGL options
$1.5M in NVDA options
$5M in AMZN options just before Covid
What are we doing?
Regardless of what happens, our portfolio has a large exposure to indices that could make us a lot of money if Nancy's predictions come true.
As we have always said, we believe it is much better to follow a system than to invest based on the news. Why? Because a black swan can happen at any time, that would make Nancy and every investor lose all the money she has in the different option contracts at once.