Greece Provides a Rare Opportunity

The turbulence in Greece is now coming to a heed; Greece has to make a payment to its creditors very soon and it looks unlikely that they will do so. I'll spare the details, but it means that anything exposed to the Euro has high implied volatility (IV).

FXE, an ETF that attempts to mirror EUR/USD movements, has an IV rank of 93. That means that IV is pretty much at the highest levels it has been in the past 52 weeks, which is to be expected given the situation.

When IV rank gets that high, its is likely that IV will contract back to the mean at some point in the near future because the IV is pricing in an event ... most of the time. Greece making or not making that payment can determine their future in the Euro area, and that's weighing heavily on the Euro.

One of the biggest influences on my trading is a YouTube channel called tastytrade. In this video, the old pros go over why when IV rank us super high you should bring more chips to the table:




So instead of taking in 1/3 the width of the strikes in an iron condor, I'm going to try and take in 45% of the width. This reduces the PoP, but it also means I take in a much higher credit. The goal is to take advantage of not only Theta decay but also IV reverting to its mean, theoretically.

Here's the trade: -8 FXE JUL 106/108/113/115 iron condor @ 0.90. That's a max profit of $720 and a max loss of $880 with a 48% PoP. Here it is visually:

It's going to be hard to watch this one because of how tight that range is! But, I trust the tastytrade guys ... and even if the Greece announcement really moves FXE, IV should drop, meaning that drawdowns will be more limited. Plus, a higher credit helps defend against drawdowns.

The TLT trade worked perfectly, and now I wish that I was more aggressive on that one. But, always remember:

Bulls make money, Bears make money, Pigs get slaughtered

If anything, regardless of results, this will be a good learning opportunity. Hopefully a profitable one!

In other news, the NFLX position is still sitting around. NFLX refuses to go up much past 625 and below 615 ...  so it's a wait and see kind of thing.