What do Brexit, a bar of chocolate, buying a new car, and a Madrid Art Gallery all have in common?

Britain European Union Exit
Britain European Union Exit

No, this is not going to be a poor taste financial markets joke. But there is a very simple linkage between them. Which when you understand it. And could provide you with a very interesting financial opportunity.

Before the opportunity, the background, and this dives into the area of neuro-finance. Anticipation is an incredible thing – the excitement, the wonder, the build up. When studying the human brain, how it works etc, the process of anticipation releases a chemical called norepinephrine.

This surge in adrenalin creates tension and causes our heart rate, breathing and even blood sugar to change, all of which is part the crocodile part of the brain that decides fight or flight.

Have you ever really looked forward to something?

As you may appreciate, the anticipation is sometimes better than the actual reward itself. Think about looking forward to a bar of chocolate, that first beer (the second never tastes as good), buying a new car and plenty of other things.

The build up is full of excitement and expectation and then the event happens, and well, it just doesn’t live up to expectations. You are left feeling flat, wondering if that is it, what did you miss out on, or what was all the fuss about. Goal driven readers will know exactly what I am talking about here.

The event itself was not as good as the anticipation of the event, and this is something that applies to all aspects of life. The Godiva chocolate was great, but the almost drooling anticipation of opening the packet was better!

So what about Brexit and how to make the money?

Brexit, in my opinion is going to be very similar. It is happening and the anticipation and initial aftershock will be substantial. In a word, expect markets to lose any shred of rational behaviour for the next week or so.

Then, the reality will set in, things will settle down, as they should, the World gets used to a new British economic landscape, and this is where the money will be made.

For example, take the VIX – the volatility index. Expect this to red line over the next few trading sessions, exactly as it did during the GFC and exactly as it always does when there is a shock in the market. IT SHOULD, because it measures the volatility in the market and provides people like me, and my clients, and other professional traders, opportunities to manage risk and profit from various market conditions, including and especially market turmoil. A while back I even authored a trading course called Profiting from Market Turmoil.

If, like my good mate and client big Chris, you have already bought into the VIX index (he used call options), he stands to make some great money.

Equally, the next few sessions will see some great trading opportunities for this and other instruments as volatility blows out, most likely temporarily.

Don’t get sucked into the fancy picture frame, study the picture

Here is a big lesson and then I will give you a tip:

Last year I took my family to Europe and no Summer there would be complete without at least one visit to a gallery, so we dropped by Del Prado, in Madrid, one of Europe’s finest. We hired an Art Historian to guide us through (and avoid the huge queues that plague Europe’s summertime) and getting an expert perspective turned my opinion on its head.

I am no art buff (we have some nice stuff adorning the walls at home) but it’s not really my thing. Being shown, first hand and by an expert, how to look at some of the works of art – yep I know we all know how to look, because we all do, but only some people see – was an absolute revelation.

She had us use our hands like a telescope to view through and all of a sudden BAM, 3D art – incredible and all from a 17th Century Velazquez oil painting! Totally different way of looking at the picture and showed something totally different to what nearly everyone else saw as they simply looked on.

So let me help you right now, everyone is looking at the markets just now, and they wont see the opportunity – one suggestion would be to look at some credit spreads on the VIX – not debit, as you will be paying more for options right now, so better to be selling. Also don’t get too excited – this is aggressive and unchartered waters – Brexit is unique – take a small slice of the action, as it isn’t without risk!

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