- 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 par with the dollar — or lower.
You can play the crisis two ways: the bearish view and the bullish view.
- First, write puts against the the CurrencyShares Euro Trust (FXE) — the ETF for the euro. Just make sure they are well out of the money. It is worth it right now — there are huge premiums on these puts for obvious reasons.
- Second, write puts against something Europeans – and Chinese and Americans – cannot give up even during a currency, debt, deficit and economic crisis: food, specifically agriculture, specifically fertilizer companies, specifically Potash (POT).
What, specifically, am I looking at for the FXE? The $123 June Week One Puts, if you write them, 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.
Slow-motion train wreck
On to food. Potash and the other fertilizer outfits 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 a dirt cheap price of around $40. If you want less risk of being put the stock or having to roll it, you can sell the June Week One $39 put and get around a half-percent return on capital — 25% per annum. Or, you can take more of a risk of having your capital tied up for a while — not lost, tied up — and sell the $40. You can get around a 1% percent return on capital, 50% a year on that position.
The bottom line: Europe is a slow-motion train wreck picking up speed. You can stay ahead of it by selling, not buying, weekly puts and calls.