Surge In Europe Stock Options Volume Shows Race To Hedge Greece
By Roxana Zega and Sofia Horta E Costa
Whatever happens after Greece?s vote, stock investors have had time to prepare.
They?ve taken action in the options market to hedge against equity selloffs, trading an average of 1.6 million Euro Stoxx 50 Index contracts each day in the past month — the most since 2011. The gauge fell 1.7 percent at 8:10 a.m. in London. Greeks voted 61 percent to 39 percent to reject terms of a European Union bailout, the Interior Ministry said.
Gauges of equity volatility have surged in European markets, where a first-quarter rally that added almost $2 trillion to share prices has roughly cut in half on concern Greece will exit the euro. The VStoxx Index jumped 21 percent last week and touched its highest level since 2012 as equities posted their biggest decline in 3 1/2 years on June 29.
?There will be so much volatility in the next weeks and so much pain,? said John Plassard, vice president at Mirabaud Securities LLP in Geneva. ?It?s not a matter of only ?no? versus ?yes,? but other countries like Spain may also ask for less austerity, and this creates a fear for global economic policies.?
Credit Suisse Group AG said on Friday that the probability of Greece leaving the euro would be 75 percent with a ?no? vote. UBS Group AG estimated a 70 percent chance.