Meltdown Lottery Tickets

Discussion in 'Options' started by luh3417, Aug 2, 2012.

  1. luh3417


    What are some good options to speculate on global economic meltdown? What countries are most vulnerable? And then within that, what e.g. index options are fairly liquid. And then within that, what particular strategy, say a short bear ratio spread.

    For example, Spain might be about ripe, Greece already happened, or further out, Italy or France, or even Japan. For example, there are options on the IBEX 35 I could trade at IB. Interested in other instruments to consider, not sure if there are more precise products e.g. on just Italian banks or just French interest rates.

    I'm going short, but if you disagree you can to take the other side of my trade.

    "Events can move from the impossible to the inevitable, without ever stopping at the probable." - de Tocqueville
  2. think about what will move the most percentage wise.. currency.. the Euro.. Euro options XDE.. where can you get the best leverage... think about the guys that bought Credit Default swaps... they paid like .001 premium for insuance the the mortgage bonds only defaulting by 4 percent.. thats a good payout structure.. i would like to hear more about this.. limited risk unlmited reward stratigies with huge leverage is what your mining for ..
  3. wanting to grab that future euro downside, yet be able to ignore some of the day to day swings.

    is there such a thing as a broken condor? looking at the FXE, put spreads, buying something like a DEC 117/120 put spread, selling a DEC 112/116 put spread, with the intent of holding till opex. nets out to a small debit .30, anything from 1.14 to 1.19 on the euro come december is money, $1.15-$1.18 pays about 5 to one. obviously, not something to trade in and out as the back months aren't terribly liquid, but something to hold for the duration once traded into.

    also looking at some further out (and down) calendar spreads into next year, on top of the end of year vertical spreads, with a similar range targeted, $110-$120, for spring next year.
  4. luh3417


    Thanks guys. Yeah I am thinking Italy or Japan might be a bit further out, but just as inevitable as Spain. Can we think of more specific contracts, as well as options strategies. Eurex has futures and options on EURO STOXX 50®.

    As far as liquid contracts go, Nikkei 225, Topix, IBEX, CAC 40, all have huge volume, at least as futures, and I assume most will also have options that remain liquid. There are some listed for Italy here but I want to check if any have much volume.

    As far as strategies go, one friend told me, if we have a choice, european expiration is preferable, he got burned by IB once on american style.

    I know everything has a price, but one issue here is the market will not want to mark to market, that is, people don't want to face reality, want to put it off, and options of course will suffer as a result. But then, the other side of that coin is that this denial in fact creates the upside opportunity. If I can't commit to timing, maybe I could short the future and hope I don't blow up. I mean its hard to see much upside, except perhaps in the USA as a reserve currency/economy. Unfortunately by that token, the indices above focus on blue chip, which will resist the tide a bit longer. Too bad there's no index for like, badly managed Italian banks.
  5. its funny how many people know in the back of their minds that things aren't going exactly the way they should over in Europe and the such.. but because it hasn't affected their standard of living most things goverment.. public are all reactionary.. no one locks the pilot door from anyone till a plane gets high jacked.. who would have thunk..
  6. luh3417

    luh3417 lists for example

    IDEM exchange trades FTMIB MFIB MINI MIB30 (Italy)
    MEFF exchange trades IBX IBEX35 index (Spain)
    MONEP exchange trades FCE (CAC 40) (France)

    I may end up trading the index future, not the options. Still a bit of leverage there. I don't see much upside (though, a couple of these were up 6% yesterday...) and I may as well "get paid" for taking that view.
  7. How do you figure futures are better the options?
  8. luh3417


    IMHO my goal is to get a position that exactly reflects my speculation on the market or prediction of future events. And, no more, as well as no less.

    IMHO the downside to options is they expire. And, IMHO, the market is in denial (not wrong, its never wrong, just in denial) and will resist "marking to market" that Europe is bust. So it may take longer for events to force peoples hands than I would predict.

    Compare the simple payback graph of say, buying a put, as opposed to shorting the future. With the put I have insurance against the index rising. But in my view of the future, I don't need this insurance, and I don't want to in effect "pay for it" by using the put option strategy.

    Now certainly, there are more complex multi-leg options positions possible. Some of them may even pay their way. Or offer me longer odds and more bang for the buck. But these will have more transaction cost and spread than a simple futures position.
  9. pbb


    Maybe you should buy some calls.
    #10     Aug 4, 2012