Greece Makes It Expensive To Hedge European Stocks
By Callie Bost and Jennifer Kaplan
While U.S. stock traders breathed a sigh of relief after Friday?s selloff, their counterparts in Europe are still on edge as drama unfolds in Greece.
A gauge of anxiety in Euro Stoxx 50 options jumped to the highest level in more than 12 years relative to a similar volatility measure in U.S. equity derivatives. The divergence reflects rising costs for hedges to protect gains in Europe even as its benchmark equity gauge sits about the same distance from a record as the Standard & Poor?s 500 Index.
Concern is growing among traders who see the deadlock between Greece and its creditors threatening European equities? fourth straight month of gains. Investors piled into European stock options late last week on speculation the region?s rally will prove tenuous as time ticks away with no negotiations.
?The danger to the markets is that Greece says we?ve had enough, we?re going to jump out of the euro, or default on our debt, or both,? Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone. ?Clearly the concern is that the impact of that could be much greater in Europe.?