Monday's Agenda

This is Brexit Day on my trading calendar, the day I set up to see if there's any way to make money on Thursday's vote on whether the United Kingdom should divorce itself from the European Union.

And so many choices!

My criteria are price of $20 or higher, average volume of 3 million shares per day or more, open interest in three figures at strike prices I'm likely to need in building a trade and option in my current series, which expire in August, and implied volatility at the 60th percentile or greater of its most recent range.

Two symbols meet my criteria for a further look entirely:

• EFA is a developed-country stock fund that is a bit more than 50% center in the European Union.
• HSBC is a London-based bank whose business interests would be impacted in a major way by an exit vote.

One symbol passes all tests except for the options series:

• EWG tracks stocks in Germany, the largest national economy within the EU. It has no August options and so I would need to drop back to the July series.

One symbols fails two tests but it is, perhaps, the purest test of all:

• FXE tracks the price of the Euro currency. It has low average volute of 543,000 shares per day, and also lacks the August options; in this case as well, I would need to trade the July series. i should also note that the U.K. doesn't use the Euro,  but the biggest players in the EU economy do. The U.K. accounts for about 18% of the EU's GDP and is the second largest economy in the confederation, so the currency would be impacted.

Implied volatility on all of the symbols was down in early trading today. FXE dropped below my 60th percentile requirement. I shall keep an eye on FXE and give it a look if IV rises. If not, then maybe on Tuesday.

I don't want the exposure of four positions but I'm comfortable with two, as long as one of them is the single-company HSBC. Among the others, I shall look at EFA and EWG.

As always, no trade is mandatory, and I shall trade nothing if my analysis shows it to be the wisest course.

-- Tim Bovee, Portland, Oregon, June 20, 2016

Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe by James K. Galbraith

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

I can be reached via comments on Private Trader posts or by email at datnillc@gmail.com.

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Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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