My plan is to long volatility on the FXE in the lead up to the French runoff election on May 7th. Today, the volatility on the FXE is trading at a normal historical level and my assumption is that the IV on June puts drops after the ECB announces their intentions tomorrow morning (they meet on Thursday 1:45 CET). The expectation is that the ECB will announce no changes but with the chance that they could always surprise the market, IV might experience a slight crush tomorrow. This is where I'll purchase the puts (looking at a strike of 97)
Going forward, I except IV to increase as we get closer to the first round on April 23rd in which Le Pen is estimated to do well. She isn't expected to win the run off but that doesn't matter as long as its a close race. I'll sell the options in the week leading up to May 7th to someone who wants to gamble on the outcome for a nice premium.
Anyone else have thoughts on how to play this potential catalyst event?
Submitted March 08, 2017 at 05:47PM by Lost_in_Adeles_Rolls http://ift.tt/2lF8joJ
