I lost a lot also since the crypto high couple weeks back as especially BCH dropped a lot from it's high of $1500 to only $650 currently but think it's a great opportunity to invest more in crypto, or if you have already more than 50% of your portfolio invested in it, to take out a loan against your crypto as chance now for it to drop more very low so margin call unlikely. This loan can be deployed in other opportunities, of which there are quite some in this crazy overheated COVID infected markets.
I don't dare to short stocks like for example $GME that is clearly seriously overvalued, as we are likely in long term stock market and can pump therefore even higher. However, we are also therefore likely in a long term commodity bear market and therefore any commodities pumping high are great shorts.
Lumber is an interesting case of a likely temporary shortage of cut lumber due to COVID hysteria causing overheated housing market as people locked up at home have nothing else to do then build another shed, and lockdowns causing lumber mills to have shortage of labor and operating hours. Uncut timber still dirt cheap so there is no shortage of wood whatsoever! Therefore it is likely lumber will go back down from current $1250 to maybe double historical level of $250, to say $500, as high prices already cause people to cut back on it's usage and backlog likely to be caught up by mills now that they can make tons doing so.
I am out of buying power however as my stock broker Interactive Brokers, does not allow me more leverage, despite I still hold cash with them. Selling my airlines or tankers is unacceptable as airlines are in a historical crises and stocks historically cheap, and tankers have bottom shipping rates again which is bad time to sell. Therefore my only option is to raise cash by either selling crypto, which is also against my investment strategy of only selling it when serious overvaluation is reached, however borrowing against it is allowed.
As to how I will short commodities. Shorting commodity stocks makes little sense, for example by selling short $GLD or $WOOD, as I can't deploy the cash proceeds. I'm also still short a big position of -23% on GLD and if I'm wrong on this trade and my overall portfolio does poor too, this position will become bigger and cause margin calls that may explode in my face.
Next best is buying put options on GLD, that dropped from 8% to 4% exposure as they dropped with rising gold price but that are priced more attractively now. For example $GLD put expiring in Jan 2022 with strike price at 160 currently costs $2.5. Chance that GLD drops from current 175 to below 160 by then looks high to me, let's say it drops to 150, that's 4x, to 140, that's 8x.
Past weeks converted my 10% ETH position into DPI, Defi Pulse Index, basically a leveraged ETH position as I think DeFi build on ETH will likely pump more at end of cycle than ETH itself. ETH already gained lots of market share, so it's outperformance vs other coins, such as BCH or DPI, is likely over.
Looking into using my crypto, DPI and BCH as collateral to get a loan of say 20% of it's value. Margin call is typically around 100% of loan value, for that to happen DPI or BCH would have to be cut in half which I believe has become very unlikely after we just saw a historically big correction from 2.5B to 1.5B, fear levels in crypto at ATH's and Buyer's index at favorable levels again (see link below).
The proceeds of the loan are also not used to leverage more into crypto but to take a non correlated investment of shorting commodities that may actually go up if stock market and crypto market would correct strong.
Hope some of my trades may inspire you as only then you can profit from it.
Please only post comments that add to the conversation.
Explanation Of The Crypto Buyer Index & Why It Is Showing Strong Buy: