U.S. Traders Eye Greek Stock Rebound With Bullish Bets at Record

Updated on

Even as Greece inches closer to default, U.S. traders are more worried about missing out on a rally in the nation’s stocks.

Bullish options bets on an exchange-traded fund tracking Greek shares have risen to a record. There were more than twice as many calls than puts -- a higher ratio than on funds tracking equities of Germany, Spain and Italy.

Investors are willing to take a gamble on a market that’s been four times more volatile than the U.S. this year amid a change in government and five month of unproductive bailout talks. They’ve added money to the Global X FTSE Greece 20 ETF every single week since January, with inflows of almost $34 million in the past four days.

“It’s one of the more interesting situations going on right now in terms of potential moves,” said Michael Block, chief equity strategist at Rhino Trading Partners in New York. “Folks want to capture the upside, and those calls are the blunt force way to be involved.”

U.S. investors are the biggest foreign holders in the Greek stock market, owning $5.7 billion in equity value, according to data from the Athens Exchange Group. That’s about the size of a mid-cap company back home.

Rally Potential

The benchmark ASE Index has climbed to its highest level since June 11, rebounding 17 percent from an almost three-year low last week. The gauge has moved an average of 2.6 percent each day in 2015, compared with gains or losses of 0.6 percent for the Standard & Poor’s 500 Index.

As the ASE fell on Wednesday, a record 15,422 bullish options on the Greek ETF traded, six times more than puts. Two blocks of 2,550 December $16 calls were created, changing hands at the same time and taking the number of outstanding bullish contracts to more than 78,000.

The most-owned contract is a wager on a 26 percent jump in the fund by September.

“The call volume would simply be optimism of a deal,” said David Negri, an equity futures and options trader at Timber Hill LLC in Greenwich, Connecticut. “Volatility and volume increases in GREK are just presuming some outcome, until the next deadline.”

GREK is the ticker symbol of the Greek ETF.

Greece’s current euro-area bailout expires on June 30, also the deadline for a 1.5 billion-euro ($1.7 billion) payment to the International Monetary Fund. Negotiations have picked up in recent weeks as European Union leaders exposed the confusion and frustration at play. Pacific Investment Management Co. is among those expecting a deal.

“Hopefully they do get a resolution and avoid some bad market turmoil,” said Sonja Uys, a fund manager at Insight Investment Management Ltd., which oversees $600 billion as part of BNY Mellon Investment Management EMEA Ltd. “They might just kick the can down the road.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE