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Euro Zone Anxiety Continues
Stocks fell again in North America and Europe as Euro Zone anxiety continues. For the last nearly two years the investing and trading world anguished over the state of affairs in Greece. Foreign currency options trading was all over the board. If there were to be a Greek financial collapse, the argument went, it would initiate a domino effect that would take down Spain, Portugal, Ireland, and Italy. After deliberations that seemed painfully slow to many of us the Euro Zone came across with the cash to bail out Greece, for the time being. However, the problem with the Euro Zone is sluggish growth in attempting to come out of the recession. The strict austerity measures added in response to the debt crisis and a broad reduction in credit ratings across the Euro Zone are probably going to keep the Euro Zone as a whole in a recession throughout 2012. Thus Euro Zone anxiety continues, but what about options trading in this environment? Options traders can profits in both up and down markets.
Which Direction Are Stocks Going?
How soon will there be a Euro Zone recovery and how strong will it be? Authorities such as the International Monetary Fund are predicting that Europe as a whole will remain in a recession throughout 2012 and resume anemic growth in 2013. Germany, however, is doing better than most of the other countries. Although the USA is doing better than the Euro Zone, Euro Zone anxiety affects the US markets as well. As is always the case with the stock market, prices respond to the news and investors try to get in early on growth opportunities. Thus, buying calls and or puts on US or Euro Zone stocks can be largely a matter of following the news and reading investor sentiment. We believe that things will be better in a year or so. Then we hear that Spain is having problems again. Investors worry about a situation similar to that of Greece. Good news alternates with bad as Euro Zone anxiety continues and anxiety causes a volatile market. Although the eventual direction of stocks will be up there will likely be a lot of profitable fluctuations along the way.
Are There Specific Opportunities along the Way?
European stock opportunities, like opportunities in US markets, come from two factors. Long term changes in fundamentals drive stock prices. When these changes become evident stocks, tend to move up or down to reflect the new information. Likewise, investor and trader sentiment changes, even when the news does not. Traders who closely follow technical stock trends can engage in profitable options trading even when fundamentals are not clear. As Euro Zone anxiety continues in light of concern about a declining Euro, options traders may wish to concern themselves with finding stocks in the Euro Zone that will prosper in such an economy. Euro Zone exporters may actually do better with a cheaper Euro.