The easy way to profit from Greece debt
Trading currencies is beyond the realm of expertise for most investors, so here are three simple ways to cash in on Greece's debt trouble
By Michael Shulman, editor of ChangeWave Shorts
The headlines are screaming that the Greek debt issue is resolved, and it's time to move on. This is simply not true, and European authorities have made the crisis worse by creating a serious moral hazard by pledging help to Greece.
The nature of the aid and the trigger for it are still unclear -- classic European political fudge -- and the current actions to backstop Greece's ability to borrow will now lead to similar demands from Portugal and Spain. The Irish could use help, too, but are too stubborn and angry at the rest of Europe to ask.
So how do you play this as an everyday investor? After all, Unless you are a fairly expert day trader living behind screens, trading currencies is out of the question. But don't despair -- cashing in on Greece's debt woes is easier than you think.
I recommend you play the foreign currency ETFs, and if you are risk tolerant, buy puts and calls on them.
Yes, puts and calls are a short-term tool for trading an event or crisis. But they can also be used for longer-term positions.
I'm an old-fashioned kind of a guy; I do fundamentals. And the longer-term trend here, in addition to short-term headlines, is a declining euro and pound. Over time, more euros will be printed to help solve the debt problem, plus political confidence has dawned in the euro due to the continuing muddle about help or no help for Greece and beyond.
Britain will have to devalue the pound to get out form under its deficits and give its economy a shot in the arm.
I have a three-proged trading strategy for you to capitalize on the mayhem in Greece:
1. Buy puts on the ETF for the euro, the CurrencyShares Euro Trust (FXE).
2. Buy puts on the ETF for the pound, the CurrencyShares British Pound (FXB).
3. Buy calls on the dollar ETF, the DB US Dollar Index Bullish Fund (UUP).
There will be a lot of short-term volatility, but longer term, the euro and pound should be going down. These three ETF investments allow you to trade currency without actually monkeying with forex. That makes playing the Greece crisis much simpler for average investors.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Here's a list of ways to profit from the potential move from defensive to cyclical stocks.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.