Europe is, to put it lightly, in a bind. Russia cutting off gas, governments thinking of putting in place price controls in place, everything from small businesses to the largest industrial facilities shutting down because of utility bills etc.
$FEZ offers exposure to Europe’s largest 50 companies. Including some from the UK. It’s been falling for a while, and given the current situation, might keep falling some more. Felt it was a broader exposure than individual country ETFs like EWG.
Will likely look at initiating positions tomorrow. @TheHouse , you’d mentioned playing FEZ a few times - any advice you might have would be greatly appreciated!
Ill be looking for an entry on FEZ this morning too, Putin made his ultimatum clear that any country that supports Russian sanctions wont be getting any Russian energy. It appears that as of now this is putting Europe in a highly vulnerable situation. We have already seen a number of recent energy driven protests across Europe from business owners and the public so this new development hightens an already challenging situation.
I would categorize this as the early stages of a black swan event, mainly due to an unclear exit strategy from both sides. Putin wants to see the western nations back away from recent US led sanctions, I find this unlikely as this would be seen as a submission to Putin and supports Putin’s vision of a commodities backed reserve currency BRICS and Russia’s place in the world as a supplier of much needed resources. But without Russian energy Europe could be in an energy crisis by the end of the year, weather permitting.
Looking at Sep 16, 33p and Oct 21, 30p
Also looks like the energy sector in large is seeing movement from this as well as recent OPEC+ production news, so ill be looking at longer energy plays like SLB.
It is curious that FEZ is actually up today but with all the bad news coming out of Europe, difficult to see how this translates to positive stock returns. Unless, of course, politicians bring on even more accommodative policies.
By way of update, the Oct puts are -35% and the Nov ones are -15%; still holding.
FEZ had moved up from the 33-handle to the 35-handle as Euro markets responded well to all the government interventions which promised to relieve the energy burden and socialize much of the costs. The relief seems to have been short lived, and we are on a downslope again.
Will keep a close eye on the $33 level. If it is breached and we go lower, all good - these puts should work out well. However, if $33 turns out to be a support level, will bail.
Closed out half of these for $2 on a limit sell, will let the rest ride for a while longer. It’s ITM, so theta can barely touch this.
The 11/18 are up 91% and will ride along too.
Reason: Europe bought itself a bit of a reprieve with the capping of energy bills, buying up of utilities etc. and markets had responded then. However, that reprieve was short lived, and headwinds continue as industry continues to get squeezed. Moreover Russia is still being a mad busy bee. So I expect Euro stocks to keep falling for a while yet. And since it’s house money now on most of it, the risk of holding is greatly reduced.
