Since late October 2009, all the reasons that Greece should have probably never been accepted into the European Union have come to light. Many Greeks conduct their transactions off the books, many avoid taxes at any cost, and there is a relatively new socialist government that was elected on promises that the euro-zone is not about to let the government live up to.
What’s more, the government finances were cooked internally and with external help from Goldman Sachs (GS) on a creative financing pact.
But lately we’re seeing more friendly comments out of the EU on aid to Greece. And despite Greece being one of the PIIGS (Portugal, Italy, Ireland, Greece and Spain), it does not seem that the country is at risk of default yet. Longer-term may be another issue, but we are looking for an options trade.
And here it is …
The National Bank of Greece SA (NBG) is Greece’s largest bank, and it has major partners all over Europe. The stock has become a virtual proxy for betting on the country’s recovery or demise.
NBG shares have been taken out to the woodshed, although many considered it relatively healthy even as Greece’s woes were mounting.
With shares at $4.30, its 52-week trading range is $2.11 to $8.37. Those lows coincide with the height of the bloodletting in March 2009. The recent lows have not gone below $3.50.
If you want to wager a bet on a near-term bounce on a Greek aid and austerity package, I would look at the NBG April 5 Calls (NBG 100417C00005000). At 25 cents, they offer what will be the best leverage, least risk, and highest chance of the out-of-the-money strike moving in the money.
What if the stock slides into oblivion?
Well, let’s just say the low premium of the option is worth the risk.
Greece’s issues are not likely to disappear entirely any time soon. But that doesn’t mean you can’t make some money on a fairly short-term recovery trade.
