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Use this Simple Trade to Profit from Fireworks in the Euro

It seems like a distant memory.

As the teargas slowly fades from the Greek Isles, it seems that the worst of the eurozone crisis is over.

Is it? I haven't a clue. 

But if you are expecting volatility to come back and for the term "PIIGS" to be all over the news, then here's a simple trade.

First, here's a look at the EVZ-- it's the VIX for the $FXE (the euro):

Single digit vol readings tend to be a floor.

Now while you can't get long EVZ (or any other spot vol reading), you can be bullish volatility by purchasing a long straddle.

A straddle is a combination of a put buy and a call buy. You make money if there is a sharp move in either direction, or if the implied volatility rises.

A solid trade here would be to get long the Jun 133 straddle for a cost of  5.00. Breakevens are 128 and 138, both of which have been tested last quarter.

And if something gets stupid and the EVZ spikes, you'll stand to profit. A move to 14 on the EVZ would return about 50% on max risk, all else equal.

The main risk? Time. If all is quiet on the western front, then you stand to see your position deteriorate over time.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/