How can I hedge an invasion? Can I Sell a Put that could offset real estate losses?

I have an apartment in Taipei. (Yes, I’m one of those saps who thinks property is the best way to build equity) In the past 3 years, the Western MSM seems hellbent on conjuring an invasion of Taiwan by China - which makes me worry that stockmarkets could become so jumpy that they could overreact to something the CCP or PLA could say or do, respectively. And in this way, send the Taiwan stockmarket spiraling downwards and spark a cascade of consternation and misplaced (and costly) worries. I’ve recently been told that the number of real estate sales in Taipei are down this year (not sure this is true).

Is there a way we can hedge this risk? Like a put option to sell the TAIEX or EWT and cover such a downturn… and thereby “make up” the subsequent loss in real estate value that many of us might endure (albeit – hopefully – temporarily)?

How could a US or non-US foreign resident do this? In Taiwan? Via IAB? Or some other platform or instrument? It’s a kind of insurance - is there insurance for this?

Given the lead time between putting an Apartment on the Market and actually selling it and getting the money, if it’s the possibility of the PLA paying us a visit then you best sell right now rather than when they start boarding the landing craft and sailing for Taiwan.

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I think an invasion would increase prices as the CCP did to Hong Kong. The CCP has sent people into Hong Kong which have bought houses after the transfer of sovereignty.

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They are down yoy right now. Whole year is still positive I believe. The problem is the economic downturn and increased interest rates. Should be resolved by second half of next year.

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I am not talking putting an apartment on the market. I am talking about selling a put option for a Taiwan index like EWT, which would crash if enough people believe an invasion is going to happen.


I don’t think there will be an invasion. And I don’t plan to sell my apartment (in anticipation of one). But the threat of an invasion could tank the stock market – so sell a Put Option on EWT as a kind of insurance should that unlikely thing happen.

My question is, if I value my apartment at US$1M (it’s not but let’s keep the numbers simple), then where or how or how much could I sell a Put that would cover a big chunk of that value – say 500k to 1M

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This is more about how to use the stock market’s short term performance. Let’s say China invades – if the invasion is thwarted and doesn’t spark the end of civilization as we know it, then the property will regain its value in a couple years (a big maybe).

If China succeeds, then there might be a risk that property records will be destroyed, but that’s probably going to be very small risk. The goal of an invasion would only be to change the government as opposed to dispossessing property (they’re Commie huns, not barbarians!) So, it will take longer, but the property will eventually regain it’s value (ok, this is a bigger maybe than the other maybe).

So while we hang out waiting for the dust to settle, we exercise the Put Option and sell EWT at the high price when we set up the contract while the Taiwan stock market index is itself decimated. I guess we wouldn’t have to sell the equal value of the real estate, but rather have some cash (a few hundred thousand?) while the world picks up the pieces. Mind you, this devastation in the market could happen WITHOUT an actual invasion – as I pointed out in my OP and my immediately previous post.

So, if you are an American, do you sell a Put Option from your US based brokerage account? And if you are not American, can you use IAB to sell a put from your HK or Singapore or other domicile account? I do not personally trade derivatives like this, so I’m curious to know what is involved and at what scale this could be

How about twd/usd derivatives on a foreign exchange?

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That seems like a whole different animal to me. Because the idea of a “hedge” is it’s supposed to let us sleep better knowing that if whatever bad thing we are worried about actually comes to pass, we are going to be covered.

Currency trading sounds like having constantly watch what currencies are doing - and there are a lot of them! We have to watch the strong dollar, the weak yen, the HKD is still pegged, what is the EUR doing, the GBP is worth what now! Put and Call Options are daunting for me but as long as we set them right, aren’t we supposed to be able to leave them alone – unless you want to trade them, too (but that’s not what I’m referring to about when hedging for an invasion). And then, of course, there are currency options (I wouldn’t even know where to begin with those!)

I think the TWD/USD will be a reliable benchmark for this purpose. If there’s an imminent invasion, the TWD will tend to fall in value. People aren’t going to want to leave their money lying around for the communists to take, are they? The USD is as reliable as anything. The Taiex will tend to fall too for sure. You never know though, the government can potentially place currency controls or stop stock market trading. A basket of different things might be best. I’d definitely want to make 100% sure everything I did was happening on exchanges and in accounts that were outside of potential CCP influence.

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How about investing in US or international defense industry stocks? If China invades Taiwan, I’d expect defense industry stocks to jump and in the meantime you should get a decent dividend yield.

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Given apartments (condos) dont really own much land, I would file that into the speculation basket. I dont think apartments can ever be anything but speculation to be honest. that can be good or bad. but it seems more a false sense of value based on man made situations. a house on land owned fee simple would be a far different investment.

but if using it as a crutch for investment, it does currently work locally. Also curious how it could be used to allow an internationally acceptable safety net should things go as the CCP have told us they will soon.

If…

china invades > taiwan can’t export > taiwan goes broke > who buys US weapons?

seems a very short term investment based on very short morals. But I suppose this type of investing is the norm :frowning:

I like the question. The problem is that nobody can predict what would happen with the stock market, TWD vs USD, defense stocks, TSMC, Taiwan ETFs, in the case of an invasion. And, since it is difficult to predict what would happen, it is difficult to hedge against that.

Perhaps you could state what you think would happen (with as much detail as you can provide). That specific thing then may be something you can hedge against.

My first thought is you can “buy the VIX”. VIX is a measure of volatility. A war between China and the US would make VIX shoot up. Then again, it might be temporary and transient and if quickly resolved you might not be able to sell in time. Also, I am not sure there is any way to “hold” the VIX long-term so there might be costs associated with that. You might need to predict to a certain degree when the invasions would happen.

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Unfortunately the costs of ETFs/ETNs seeking to replicate the VIX are prohibitive over the long term. Not so much a matter of fees, but rather a problem of contango.

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It’s difficult to hedge something that maybe probably won’t happen. Isn’t there something simpler you could do? Defense industry stocks are tied closely to actually events happening.

Why not invest in smokes?

MO and PM are still massive in my portfolio, and have been for going on two decades. They done me right.

Drugs, sex and food have historically always sold well.

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Which is the dream if most landlords in Taipei…unless they get sent to a reeducation camp!

And that latter is the best case scenario.

Isn’t the US like already stretched at its limit, raiding the storehouse, between loading up Ukraine and Taiwan with weapons?

You believe that?

I meant BUY a Put Option, not sell. This is a clue that I shouldn’t do a strategy that I cannot even properly articulate

So the idea is to buy a contract to sell EWT (or TSM or NT$) and if it does crash in the next 2 years, not because there is an invasion, but because someone said something the wrong way at the wrong time sending the market plunging 30% in a few days because the jittery people in New York think there could be an invasion, then you exercise the option and sell at today’s price (i.e., the level when you set up the option) and thereby pocket the 30%

Buying a put option gives you the right to sell a stock at a certain price (known as the strike price) any time before a certain date. This means you can require whoever sold you the put option (known as the writer) to pay you the strike price for the stock at any point before the time expires. However, you are under no obligation to do so.

Buying put options is a way to hedge against a potential drop in share price. They could also reap profits from bear markets or declines in the prices of individual stocks.

https://smartasset.com/investing/put-option

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