Owners of Greek bonds at this point should know what they own, I can't imagine any Euro Sov debt holder to be hit with "shock and awe" every time negative news hits the tape.
One of the hardest trading environments is when the market continues to recycle the same news, yet the sensitivity levels to the news stay the same and the market continues to act as if it fresh and acts with knee jerk responses. We are currently in one of these environments. So the question for the markets is simply when do you stop to trade the same old headlines and focus back on fundamentals of companies? The market needs a new crisis to focus on- Going east, we move from the US Credit Bubble, Euro Sov, next stop we will land in China. The market can never focus on more than one issue at the same time.
Greek bonds are currently priced at 90%+ default? Look at the market response - zippo! It seems the market deep down still believes that somehow, someway, the Greek challenge will get resolved and are happy to see to financials down as satisfaction.
Unless the market gets pushed over the line with a true unacceptable situation of no choice besides jumping into the abyss, PFG continues to favor shorting vol while the world decides what to do with the Greeks. The pain of 50%+ drops in many Global financials stocks is satisfactory for us. However, it is still very unsettling that the CEO's of financials continue to lie about Capital raises (BAC, Soc Gen).
What is a vol trader to do? What is my edge in going short vol? Headlines for September are packed with upcoming news about the Euro nations next moves, we believe at this point the market is prepared and the news is out. Therefore, the need for new, marginal vol at these levels is no longer desired.
Short SPY Nov 100/130 Strangle @ 3.30 - legging into trade, 4 tranches of 25%