To be down on Europe is quite easy these days. Structurally, the cultures among Eurozone members are quite vast, and the labor market is very rigid. When employers cannot easily fire workers, they are reluctant to hire workers. This is a main reason why Spain’s unemployment of younger workers is around 50%.
The European economy is a slump. A handful of negative new orders readings across Europe hints at declines in production. Furthermore, the European central bank is unwilling to flood the market with Euros the same way the US & UK authorities have. All of this points to a weakening currency. I am also willing to suspect that funds are continuing to leave Eurozone banks in order to find new homes in Swiss, British, or Scandinavian accounts.
With this backdrop, I took a negative position in the Euro by purchasing two put options on FXE, the Euro currency ETF, at a strike price of $126 that expire next month. Price paid was $4.30 per contract. In May, I initiated similar futures positions against the Euro on the basis of Greece fears and political infighting. Although both yielded me quick profits, I am less certain on the timing of this trade and am therefore unwilling apply leverage to this transaction at this time.
