2 Weekly Options Trades to Play the European Train Wreck

by Michael Shulman | May 30, 2012 8:30 am

There are many ways for investors to benefit from the slow-moving train wreck that is the European financial crisis. Among them:

Postpone your visit to Greece until next year when they are out of the euro and everything costs 60% less.

Postpone your visit to the rest of Europe until next year after the European Central Bank floods the continent with euros and the euro is on par with the dollar — or lower.

Or, you can trade the crisis by selling weekly puts and calls.

Trade #1: CurrencyShares Euro Trust

Write puts against the ETF for the euro — the CurrencyShares Euro Trust (NYSE:FXE[1]). Just make sure they are well out of the money — there are huge premiums on these puts for obvious reasons.

Take a look at the $123 June Week One Puts. If you write them, they will give you a 1% return on capital in a couple of days if they expire worthless. The range of $120-$122 is a very firm floor, so sell something a bit higher, collect more premium and know you can always roll the position into the $120-$122 range and you should have an opportunity to get out with a profit even if the FXE moves faster — to the downside — than you expect.

Trade #2: Potash

Write puts against something Europeans — or anyone for that matter — can’t give up even during an economic crisis: food, specifically fertilizer companies like Potash (NYSE:POT[2]).

Potash and the other fertilizer stocks sold off for no rational reason — not that rationality has anything to do with the markets or traders — and they are now bouncing back big time. Potash is a fundamentally great company selling for dirt cheap.

If you want less risk of being out the stock or having to roll it, you can sell the $39 June Week One put and get around a half percent return on capital — 25% per annum. Or, you can take on more risk and having your capital tied up for a while — not lost, tied up — by selling the $40 June Week One put and get around a 1%  return on capital — 50% a year on that position.

The bottom line: Europe is a slow-moving train wreck that’s picking up speed. Stay ahead of it by selling — not buying — weekly puts and calls.

Michael Shulman is editor of Options Income Blue Print[3]. Learn more about trading weekly options in this free short video[4].

Endnotes:
  1. FXE: http://studio-5.financialcontent.com/investplace/quote?Symbol=FXE
  2. POT: http://studio-5.financialcontent.com/investplace/quote?Symbol=POT
  3. Options Income Blue Print: http://optionsincomeblueprint.kajabi.com/fe/13713-my-income-secret-weekly-options
  4. free short video: http://optionsincomeblueprint.kajabi.com/fe/13713-my-income-secret-weekly-options

Source URL: http://investorplace.com/2012/05/2-weekly-options-trades-to-play-the-european-train-wreck/
Short URL: http://invstplc.com/1fvZjG2