Trading Truth for Pravda (USO, RSX)

Trading Truth for Pravda (USO, RSX)

Had a friend in high school who delighted in conjuring up all sorts of labels for body parts that were as yet unnamed and announcing to the lunchroom in pseudo-scientific fashion his latest ‘findings’.

He was a twisted fellow, to be sure, but we were mesmerized by his devotion to the discipline and equally titillated and amused with his diagrams and descriptions of just why things moved or smelled or appeared they way they did, the evolutionary function of each and, at times, in his more prophetic moments, the divine purpose and design behind that particular morsel of human flesh.

Thus was born the ‘groove’, the ‘seam’, the ‘mandrake aureolis’ and the ‘braying aperture’.

Chicken Skin


And you ask, what’s the purpose of such nonsense, O’Haynew? This is an investment newsletter, not National Lampoon. It’s supposed to be hard-nosed and direct. What are you up to?

Faith, friends. There’s method to his madness.


Janine! Immortalized!


We bring the above as a parable, to illustrate what many have already seen to be true, what others are just waking up to and what the vast mass will likely never apprehend. And that is, that we live increasingly in a world of euphemism, doublespeak, circumlocution and outright lies, where sick ideas and twisted aims get a rational hearing because they’re couched in language that’s benign, at worst, but more often in words pleasant-sounding and even soothing.

That’s how a diminution in the very value of our currency can come to be called ‘quantitative easing’; how psychiatrists can invent a new diagnosis called ‘Opposition Defiant Disorder’ (ODD) to apply to anyone who is troubled by the tendency toward increasing government control of our lives, or, indeed, shows any sign of opposition to authority; how ‘homeland security’ can be trotted out to rob individuals of their constitutionally enshrined rights or even kill them via drone-strike; or how ‘civil forfeiture’, a term that sounds like it fell like a leaf from the textbook-tree of jurisprudence, can justify the outright theft of private property by local police forces.

This is Orwell’s 1984, friends. No less. It’s Newspeak, and we hear it regularly. If you listen carefully you’ll come to know that the conflict today is a battle to ‘control the narrative’, and to create ‘talking points’ that will ‘shape the message’. Nowhere – anywhere – is there a desire to tell the truth, the whole truth, come what may. Information manipulation is the game. Offering a ‘credible story’ rather than stating the facts is what moves the world of business and politics today. There is no more presentation of data. There is only spin.

And it’s going to get worse


Making things up to convince, cajole, and ultimately control people is a practice that has existed from time immemorial, and leaders and kings of all ages have engaged in it. But the means by which it’s employed in a free society like ours necessitates a sophistication and dedication to falsehood that is unprecedented. Today, when Joe Blogman has an opportunity to shape the message as well as any major news daily, the job of the spinmeister becomes all-important, and the deceit and brazenness in delivering the message becomes paramount.

Be sure – there will be no effort spared, no stone unturned, no lie, large or small, omitted that might assist those who steer the ship of economy and government to keep you in the dark.


Regarding the inevitability of our current state of affairs, by the way, Orwell had little doubt. We would eventually arrive, he believed, at a stage of ‘universal deceit’. And regarding that eventuality he wrote –

“During times of universal deceit, telling the truth becomes a revolutionary act.”

We’ll, of course, do our level best to offer you the straight goods as the big lie gains in intensity. But for now, let’s return to making money.

Russian Oil


We’ll start with our covered CALL initiative on the Market Vectors Russia ETF (NYSE:RSX), first launched in the summer, reset in the fall and that currently breaks down as follows.

We own 300 shares of RSX stock at an average cost of $18.97 per share. Yet as of last month’s options expiry (when our January CALLs died and left us with their full measure of premium), we’ve been without a short CALL position on the stock. Today we intend to remedy that.

Note well, too, that we’re still in a losing position on the trade. RSX is currently at $16.41, and even though it’s rising in tandem with oil, we still have some heavy lifting to do before we break even.

Take a look at crude of late –


It’s no secret that as goes oil, so, too, goes Mother Russia. And this chart of the United States Oil ETF (NYSE:USO) shows we’ve likely hit a crude bottom.


We’ve had divergence from both RSI and MACD indicators since mid-December (black lines), and just last week RSI popped bullishly above its midway waterline (in green), with MACD poised to follow shortly.

More significant, perhaps, is the wild surge in volume (black circle) as USO plunged toward $16, the weak hands capitulated, and eagle-eyed investors keyed in on a tremendous buying opportunity. Average daily volume on the stock grew from a sleepy 4 million shares to an unbelievable 30 million in just over four months!

That’s astounding.

Though the moving averages are indicating that we could be in for a longer term bear market for oil (in red), a significant bounce here that carries USO up to $27 or $28 is not out of the question.

That’s why we’re auctioning off another trio of RSX CALLs, this time using the May 18 strike. They currently go for $0.85, and that reduces our adjusted cost base for the shares to $18.12 per. Should they be called away at expiry we’ll take a loss on the trade of thirty-six bucks. If not, we’ll write another round of CALLs and move into the black.

Let’s watch how it unfolds.

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Options Trader Elite recommends you consider selling three RSX May 18 CALLs for $0.85 each, for a total credit of $2.65.



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Options Trader Elite recommends you consider selling three RSX May 18 CALLs for $0.85 each, for a total credit of $2.65.


With love of the hunt,

Hugh L. O’Haynew, Senior Analyst, Normandy Research

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