The Aussie Bubble Is Bursting

It appears as if everyone is calling something that occurs in the markets a bubble these days.

Characterizing everything occurring in the financial markets as a "bubble" is the lazy way to explain something that has moved up too far and too fast, or that's what folks are led to believe. Bitcoin? Bubble. S&P, Dow and the NASDAQ? Bubble. Twitter, Tesla, and 3-D stocks? Bubble. The list goes on and on.

So: figure that I would take one of my short ideas from the summer and reiterate my Bubble Post which was probably one of the first in 2013. Basically, the Aussie's run from 2008 is over:

After soaring nearly 100% from its 2008 lows the Aussie has pulled back some in 2013, but I think that's just the tip of the iceberg.

Why? Well, first and foremost Glenn Stevens, Australia's Reserve Bank Governor, continues to hint at plans to weaken the currency. Also: recent economic numbers from Australia continue to be weak, with their latest GDP numbers coming in below expectations.

Last, but certainly not least, is the continued decline in commodity prices. With possibly 20% of Australia's economy derived from mining and services related to mining, it would be easy to see how a decline in commodity prices could have a huge impact on the country.

We wrote in July on how we thought the Aussie was ready to drop under 90, and it did before bouncing in the low 90's.

With Japan weakening its currency via its "Abenomics" policy -- named after Japanese Prime Minister Shinzo Abe -- it would make sense that the Aussie's decline was put on pause. But now seems the perfect time for the Aussie to fall through previous lows and move towards 83 in the coming weeks.

So how does an option trader make money on a move on a currency? By trading exchange-traded funds, or ETFs. One such ETF is CROC, and it's an ultra-short ETF that tracks the Aussie. We currently hold $47 December calls on CROC as well as being short on the AUD/USD from 91.69.

Aussie 12-15CROC 12-12

JimmyBob (Scott)has been trading equities for over 15 years, a majority of which were OTC micro-cap stocks. He started trading high risk stock options over the past 7 years, and has proven winning trades in excess of 15,000%.

As one of the Co-Founders of, Scott enjoys sharing his knowledge with other investors through timely blog posts, daily watch lists in the forum, weekly webinars, and helpful advice within the chatroom.

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