After the futures opened nearly 30 points to start the Globex Session on Sunday evening, you heard much talk about increased concern of a Greek default over the weekend.
With this story approaching year 5, there should be a consensus among the rational: Greece will inevitably default and exit the Eurozone. The writing has been on the wall for some time now, and to deny this would be foolish. Even if the powers that be are successful in staving off disaster in the near-term (don’t discount this possibility) and manage to kick the can down the road, the story still ends the same.
Now that we’ve cleared that up, we can address the recent market tremors in earnest. Crude’s 8% drop in Monday’s session, coupled with the Shanghai Composite Index’s 3-week, 29% free fall, are much more interesting plays in the near-term.
Such as Crude’s 8% drop and what is now being labeled as officially a bear market in China.
‘BTFD’ remains in full effect, just as it did yesterday with /ES and SPY.
How I’m Playing It
The ETF ASHR ($41.99) seeks to replicate the Shanghai Composite Index directly, with holdings in the 300 companies that comprise the index.
ASHR hit an all-time high of $55.19 on June 12, but has since fallen precipitously – over 25%.
The United States Oil Fund (USO, $17.73) is futures-based, and is thus able to track the price of NYMEX light, sweet crude very well. USO shares are off by over 8% over the past month.
My Trade
My Trade: Buy the USO Aug 18-19 Bull Call Spread for $0.30
Risk: $30 per 1 Lot
Reward up to $70 per 1 Lot
Break-even (price at expiration): $18.30
Greeks of this trade
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
