I voted this morning.
There is something cathartic knowing you did your duty and now the Jury Summons is on the way. There it is, it is done. Election or no, I am keeping to my normal routine of not looking at TV news during the trading day.
Is there really going to be any market moving news until 8 or 9 pm tonight? Really there are two elections, the US Presidential Race and the Greek vote on the new bailout/bridge package that actually has some real reforms. With 100,000 or so people marching in the streets (the rest I guess are working) the crux of Euro Zone problem is now in the hands of Greek politicians. Can they meet the test and roll back the labor laws that impede growth? We will see tomorrow.
THE VIX
The rally from yesterday extending to today is more of a symptom of fund managers not owning enough stock going into the end of the year. I have the Volatility Index (VIX) off about .90 from the mid-day highs yesterday and very solid activity in the VIX Nov 16 put. Paper is buying that put as the volatility meltdown after the election looks like a pretty decent bet. If I did not have the Greek election at the same time it would be a better than decent bet.
THE TRADE
That brings me to a trade idea. The trade really is bet on gamma over the next several days (the S&P 500 (SPX) gamma looks very expensive).
The CurrencyShares Euro Trust (FXE) is down from $130+ recently on the lower sovereign bond yields but the troublesome Greeks and the squabbling have pulled the FXE to the $127.20 this week.
In most of the recent history positive news has met with sharp rallies in the FXE. I don’t think this time will be any different. If the Greeks pass on the reform, I think it will get ugly for the Euro.
That makes the trade buying a FXE Nov 127 straddle and holding until Friday of next week. Add a kicker by purchasing one VIX Nov 16 put (VIX expiration is after normal expiration this cycle on Nov 21s) to play the post-election volatility crush.
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