To The Moon

The New Term “NACHO” and Shifting Market Expectations
Recently, new buzzwords have been emerging in financial markets. Following “TACO” (Trump Always Chickens Out), another term—“NACHO”—has quietly gained traction among traders. “NACHO” stands for Not A Chance Hormuz Opens, implying that there is little hope for a quick resolution regarding the Strait of Hormuz. Essentially, this reflects the market’s declining confidence in a swift reopening of the strait, leading to expectations that elevated oil prices will persist far longer than previously anticipated, thereby reigniting longer-term inflation. The emergence of this term also signals a shift in market focus—from short-term price fluctuations to a broader consideration of assets’ inflation-hedging characteristics over a longer horizon.

Sharp Oil Price Volatility, but the Trend Remains Intact
Amid ongoing developments surrounding negotiations over the strait, oil prices experienced significant volatility last week, with daily declines exceeding 10% becoming increasingly common. While this presents opportunities for short-term traders, for medium-term investors, such volatility does not indicate a reversal of the broader trend. After all, the market continues to be driven more by speculation than by any concrete progress toward reopening. Therefore, medium-term investors are still advised to monitor oil prices in relation to the 10-week moving average. At the same time, longer-dated futures contracts (such as the September contract) continue to offer relatively attractive trading value. Investors may consider seeking long opportunities in alignment with the 10-week moving average.

Options Strategies to Address Uncertainty
In situations like last week’s, the most effective way to buy the dip is through a bullish vertical spread using call options. When oil prices drop sharply but the underlying news remains unclear, investors may wish to enter at lower levels while limiting downside risk. Options strategies provide a way to cap potential losses. Specifically, this involves buying an out-of-the-money call option with a lower strike price while simultaneously selling an out-of-the-money call option with a higher strike price. The advantage of this strategy lies in reducing the impact of implied volatility decay. Although the maximum profit is capped, this type of left-side trading approach is more likely to secure an early position when the market bottom has not yet been confirmed. Adjustments can always be made once the bottom becomes clearer.

Gold at a Critical Inflection Point
Since falling below the 20-week moving average—a key indicator of the medium- to long-term bullish trend—gold prices have not experienced a sharp decline, but the market has remained subdued. Currently, gold is still hovering around this moving average (4,800 level). In the coming week, gold is likely to choose a new directional path, potentially driven by CPI data. If prices continue to rise, investors may consider re-establishing long positions. However, if the market moves downward, the possibility of setting new lows remains. Investors may therefore prefer to wait for clearer directional confirmation next week before re-entering the gold market, in order to avoid unnecessary portfolio volatility.

Volatility Persists, Creating Opportunities for Options Positioning
From a technical perspective, gold’s volatility has not diminished. Over the past two weeks, as news surrounding the strait has remained relatively calm, gold prices have moved sideways. However, once a clear development emerges and a direction is established, gold may again experience significant volatility. As a result, a strategy of purchasing a small number of options positions could help capture potential outsized returns.

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