A hedge if a black swan flies over the weekend

We all know that the final French president election is coming over the weekend on May 7 and this could be a huge market mover, if the result is not what is expected. Per the first round result just 2 weeks ago, it appears the EU-friendly candidate, Macron, is largely expected to win. If so, I think the positive result has likely been priced in and the market may not respond too much to it. But what if the result goes in the other direction that the anti-EU Le Pen wins the election? Although the chance is probably low but when everyone bets for one direction, the opposite may often come to fruition. I just don’t think we can be so complacent. I would rather be prepared for something unthinkable for a potential huge selloff following the French election. One way to do so is to short the weakest link that will suffer most if an anti-EU French president is in power. You can guess which one I’m thinking about. Yes, Greece again! 


As I said just a short while ago, Greece willlikely be among the biggest beneficiaries if French is still stable within theEU and I bet Greece stocks (via GREK) should go up significantly. Sure enough as if the market is listening to me that GREK has jumped about 15% since I talked about it in less than 2 weeks ago. This seems too fast too soon and it is also a sign of a great deal of complacent out there. I’m nervous about this and I think this is a great opportunity to use the very overbought GREK as a mean to hedge against the fallout of the French election. This is how I’m doing to use options in such a way that I won’t lose much if the result is expected but can get 5-10 times of gain if there is a huge selloff. You still have one day to act if you want to. For a more direct short of the French stocks, CRTO could also be considered as someone sold a huge number of its $52 calls yesterday, likely betting for a plunge of the stock if the result is unexpected.