A Trade Idea Ahead of the Greek Election

Thu, Jun 7, 2012 | Jared Woodard

Market Commentary, Trades

I have some quotes in a Reuters article today about options trade ideas in advance of the June 17 election in Greece. I said that:

investors can gain some short term exposure by selling a time spread. This is another kind of volatility bet, using short-term or weekly options on the S&P 500 index.

For example, buying the SPX 1300 puts expiring June 22 and selling the SPX 1300 puts expiring July 6 recently could be done at a price for $7.70.

If there is a bad outcome in Greece and volatility spikes, the weekly put expiring June 22 can be expected to gain in value more quickly than the put with a later expiration date, he said.

Conversely, if a pro-bailout government is formed, he expects volatility to decline, causing a loss to the trade. Woodard suggests that this trade be put on closer to the election date, since other events could influence the markets in the interim. (“How to play it: Options trades ahead of the Greek elections“)

I like this time spread idea using the weekly options better than a straightforward straddle, but who knows what the SPX term structure will be like a week from now. If we put any trades like this on for clients, it will probably be taking the other side, since it’s more likely that SYRIZA won’t press their luck if they win or that some anodyne coalition will be formed. 

 


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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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