We have been holding put option positions on XHB for January 2024 $55 strikes for some time now and our strategy with these positions was largely predicated on looking at data, charts and analysis based on the 2008 crash and similar parallels to the post pandemic crash.
The CEO for RH recently stated, “But one thing I’m certain of: The housing market is collapsing at a level I haven’t seen since 2008. I haven’t seen this kind of drop since 2008.“
Sales tanked 13.6% from a year ago to $869 million, net profits were about cut in half, inventories have risen by $85 from the start of the year, and sales of RH’s pricey home furnishings plunged.
Finance Yahoo
Keep in mind that we are still at the start of the crash and we have a long way to go. The housing peak happened in April 2006 and it took all the way to April 2009 for housing to bottom. If the same or similar pattern holds and the peak occurred in December 2021 then we can expect a bottom in December 2023 or later. We placed our XHB bet on this pattern so we are holding puts for XHB $55 strikes for January 2024.
The Federal Reserve has an meeting next week and they plan on raising rates again which won’t help housing in any way, shape or form.
We have about 12 more months to go to find out if we were right or wrong with our assumptions and analysis. To find out, stay tuned, stay profitable and stay solvent…