Positioning For The Weekend: BofA's Risk Cheat-Sheet

Tyler Durden's picture

With Greece preparing to go to the polls this weekend for the second time in a little over a month, BAML's credit strategy group addresses three potential outcomes of the election on a number of asset classes. While they do have concerns about all of the possible post-election scenarios they do not necessarily lead to an exit from the eurozone, at least not in the very short term, and some of them could even lead to an initial market rally that could temporarily strengthen the euro. Their analysis focuses on the near-term (four-week) market implications and assumes that neither Spain nor Italy will have a sovereign crisis during this time frame, though those concerns will likely persist.

The three scenarios are:

  • Base case (high probability): election result allows Greece to form a pro-EU government; limited European policy response;
  • Bull case (low probability): election result means Greece does not form a pro-EU government; substantial ECB & European policy response; and
  • Bear case (low to medium probability): election result means Greece does not form a pro-EU government; limited ECB/ European policy response.

The one-month asset price response for rates, credit, equities, FX & commodities are detailed below.


Background on the election

For a new government to exist, it needs to have at least 151 of the 300 seats in the Greek Parliament. The difference between New Democracy and Syriza is still within the margin of error generally attributed to the opinion polls. The party with a plurality of votes gets a bonus of 50 seats and the remaining 250 are distributed proportionally to the percentages obtained between those parties that received at least 3% of the vote. Therefore, the outcome is dependent the party that comes in first, the number of parties that get into Parliament with at least 3% of the vote and the percentage that each party achieves.


Source: BAML

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MeanReversion's picture

Positioning myself with a bus load of July 14 XLF straddles.

AldousHuxley's picture

greek banks up 30% today. wall st. must know something.


check out NBG



politics is circus universally

Greek Neonazi Politician Hits Communist Woman on Live TV


MeanReversion's picture

Exactly, I'm not taking the risk going short into Monday.  What I can I probably say with some degree of certainty is you will likely see some big short term move in financials (although this market is absolutely baffling), who knows which way, but might as well play both sides.

AldousHuxley's picture

casino is designed lure rich fools to bet on their ego instead of reason.


there is no cheat-sheet to beating the house, except not to play the game or own one yourself.


Banks don't bet, they broker as bookies. Where there is no game, they make one up and hype up hopes of easy money, and keep the fees.



Michael's picture

The United States Federal Government needs to end its Public/Private Partnership with The Federal Reserve Corporation.

The Federal Reserve Corporation has managed to fuck up The United States multiple times during the past 15 years.

From the Dot-Com/NASDAQ bubble and bust, what some $7 trillion lost and covered up by Building 7 on 9/11?

To the most epic US housing bubble and bust, it performed beyond my wildest imaginations, even more so than that previous bust did.

Now what do I even call this, what the Federal Reserve Corporation is trying to pull off?

I think I'll call it, "The Credit Money Bubble of Epic Proportions", for now.

It'll will be a performance of a millennium we will remember, for at least the rest of the millennium.

Complete and Total Worldwide Economic Collapse 2012


The man said euro dollars at 1:18 ...The euro did not exsist in 1981?!?!?! Nice catch from a comment on the video. Tell Alex Jones.

Michael's picture

The ECB is trying to pull off a Stalin, but they have no armies.

Chaffinch's picture

Eurodollars are not Euros Michael.
From Wikipedia -
During the Cold War period, especially after the invasion of Hungary in 1956, the Soviet Union feared that its deposits in North American banks would be frozen as a retaliation. It decided to move some of its holdings to the Moscow Narodny Bank, a Soviet-owned bank with a British charter. The British bank would then deposit that money in the US banks. There would be no chance of confiscating that money, because it belonged to the British bank and not directly to the Soviets. On February 28, 1957, the sum of $800,000 was transferred, creating the first eurodollars. Initially dubbed "Eurbank dollars" after the bank's telex address, they eventually became known as "eurodollars"[2] as such deposits were at first held mostly by European banks and financial institutions.[2] A major role was played by City of London banks, as the Midland bank, now HSBC, and their offshore Holding Companies.

neidermeyer's picture

I just bought a Mercedes on credit ,, I expect to be giggling as I make my payments after the first year... when the decision becomes "buy a dozen eggs or payoff the car" I'll pay it off.

HarryM's picture

Everything mentioned in the Reuters article was already on the table – no surprise announcements .

Interesting move , but why Thursday and not Friday?

Maybe drive down the shorts on no news so the positions can be picked up on the cheap before the weekend?

For maximum negotiating power , it is in Greece's best interest to vote in those who are anti-austerity , then squeeze Germany's balls like a vice.

There would be zero gain voting in a pro-austerity crew - would be a massive defeat , Greeks are already bent over and have assumed the position, they have nothing to lose and much to gain.

You think today's rumor is a doozy , wait till next week - will be rumor after rumor until the shit settles.

shuckster's picture

I think it will drive up all US assets - stocks and commodities alike - as a flight to the supposed safety of US assets starts - however, I think the euphoria on US shores will be short lived. We may be betting heavily against Europe, but that won't save us from our own huge economic failings. In other words, short term bullish...

Richard Chesler's picture

Long positioning the banksters under lamp posts.

jezzarayman's picture

Wish Goldman would come out with their weekend position recommendations, then we would know what to do.

AldousHuxley's picture

CFR wants Euro to be broken up. Within 10 years France/Germany is threatening US dollar petro dollar. Arabs wanted to switch to Euro.

salvadordaly's picture

That is starting to make sense. Syria? Egypt? Afganastan? Iraq? War?

AldousHuxley's picture

Syria exported oil to Italy. meaning Italy gets oil subsidized. history of colonialism.


Egypt belongs to british...

Afghanistan and Iraq belongs to US....to setup attack on Iran.


when banks fuck up and people lose confidence in the fiat game, they send out military to steal commodities from others to boost confidence back into fiat. USD is backed by oil and military might.



Vic Vinegar's picture

Pro-tip for anyone in the "Patriot" movement: the CFR ain't all that bad. Maybe they ain't virgin pure, but they aren't all that bad, either...

jezzarayman's picture


opposite indeed! 

still deciding how to play it......either hit the sidelines or keep my SPX, DAX & EURUSD shorts with very tight Guaranteed stops from tomorrow's closing prices. Tight stops on the Long Gold position too which I think will sell off when we get nothing from the fed on thursday. If I had to guess I would suggest August 1st meeting, after one more dismal non farm payrolls on july 6th, this will offcourse coincide with further escalation in the europe crisis. 2012 Olympics may provide some welcome distractions to the economic chaos and central bank intervention. Regardless of the ECB reaction, an anti-bailout party win will make monday very interesting. 



Dr. Engali's picture

Bank of America's risk cheat sheet:

1)Move 75 trillion worth of derivatives over to the bank side of the company and put the risk on the tax payer. 2)Collect bonus for enginuity.

SV's picture

I'm calling BS on the Bull/Bear spread on Brent/Au.  A Bull case with $5 USD upside and $15 USD down, with Au only dropping $75 - Really!?!  They are smoking something, probably obtained from the Choomwagon.

Yen Cross's picture

The bank of Japan just "Ker-Plunked". The Japs are Fucking JOKE!

   What a shit load of douce bag banksters in Japan! I guess they are really serious about trading with China.

      Abunch of Fucking washout ass holes Japan is!

   Show your faces junksters! Ya pussies! We both know the game. Flush the toilet, then buy! You wana be dousche Pads!


   You clown Asian traders don't want to tell me you washed dollars? All 3 of you ? We know who you are. Children of the Sand!

Non Passaran's picture

That is one drunk sore loser!
Godzilla 1 : YenCross-ed 0!

BlandJoe24's picture

Tyler, how do you agree/differ with Bof A's presentation?

Vic Vinegar's picture

Is it a good question?  I don't think so.

It seems like this is some garbage some BofA jackass put together before calling it a day.  Maybe I'm wrong as I didn't click on Table 1...but it seemed the analysis before that was "hey, a few different things could happen".

Who knows what's going to happpen?  Listening to prediictions in financial markets or politics is like listening to sports talk before a game...a bunch of goons throwing shit against the wall.   Let's just see how the dust settles and deal with it afterwards.

q99x2's picture

I'm wondering what a Greek would do to prepare to go to the poles.

Yen Cross's picture

Any sane Greek would have mailed in a vote and run the bank!

Assetman's picture

they would probably learn a bit of the language.


Yen Cross's picture

 Why can't I post Greek on Z/H? I'll just do it the hard way!

adr's picture

Nomatter what happens, we're screwed. Filled up in northern Virginia today for $3.14 per gallon, got back home, still $3.79 at all my local stations in Ohio. Stuck at that price unbudged since Monday. Diesel was $3.59 in VA and also $3.59 in OH. Can't explain that one either.

I'm sure there is a perfectly reasonable demand based explanation for that. Sure.

That is a giant fucking price gap for the same unleaded blend about 300 miles apart.

Bunga Bunga's picture

Go long banks. Greek election will be better than expected. "Surprise" announcement from Ben will follow. All is great.

Assetman's picture

That's probably right.

But unfortunately, the Greek result is somewhat irrelevant at this stage, as the goverment there still can't rein in enough income to support its bad spending habits... meaning that they will continue to be a bottmless pit of sovereign risk that needs to be "saved".  Or better put, those Greek banks that serve the black hole sovereign will need to be 'saved'.

And it's really hard to tell if any party coming into power is going to be able to arrest the capital flight that is already happening on a massive scale.  Capital controls will need to be implemented soon... and it will be a very unpopular move for any party that's in power.

At this point, Greece is a distraction... even though the possibility exists that it will be a temporary source of "good" news for the risky markets.  It's what develops in Spain and Italy that will have greater influence in driving asset prices.


lewy14's picture

Right this moment the board is green.

Bright. Fucking. Green.

Where's my crash?


[sorry. had to vent.]

Yen Cross's picture

These currency shifts are so obvious. It wo't fix anything. It's a pathetic attempt to kick the can. GBP and IND and NOK all stayed flat whilst JPY strengthend. Japan is trying to intervien by, buying dollars! It's a pathetic attempt at devaluation .

  Aps. for the mispells on my Android.

Hugesky's picture

Wait for the rallly.... lots of shorts need to be covered usual stop loss mentality of day traders and momentum chasers... then sell / SHORT it hard.


Nothing has changed... one massive ponzy scheme..precipitated and supported by another massive ponzy scheme....

Yen Cross's picture

 I do don't feel comfortable discussing trades on Z/H . I look back at some of my comments, and they correlate with positional moves, that would not have happened.

   No offence Tyler.    Silence is (xau'den).  I'll discuss theories, and concepts.

   Junk this. aud/jpy divergence from aud/usd .45 in 4 hours!   Junk me all ya want!

Bull Bear's picture

No matter the outcome, if Greece stays, goes or whatever, what does change NOTHING, nothing changes in Greece, Spain, Italy, Portugal, Ireland, Holland, as a matter of fact in all of euroland, unemployment is still the same, all that is there now will still be there after the Vote, this is only a Game and we are the pawns, this Vote really does not change the Fundamentals of Greece or in all of the EU Zone one little bit....

Yen Cross's picture

You are 100% correct. I liquidated all my aud/eur/usd positions, at great cost. I do not trust the F/X markets.

  I entered trades that are "innocous" and part of what I expect as normal flow. It's windy here.

BeetleBailey's picture

Yen...I "normally" do a Yen spread trade at 7am every morning - not today.

In fact, I am all flat - and NOT trading until this idiotic election is over - I think it is the best move to sit on the sidelines and not try to out-think/out-guess these markets.

Bull Bear's picture

Was there a way to hedge your positions? This way you may have not to sell them all, just thinking, who knows what will happen, you are right, if I would be trading currencies right now I would stay away from the Market until next Wednesday, then see how to make sense of the market...... as a small retail investor, sorry I dont know if you are one, I should not asume you are, but if you are follow your trading strategy if it worked yesterday it will work tomorrow......

Splootch's picture

move about 5-10% on sp500....your kidding me if the sp 500 go up by 130 pts monday!

Kiwi Pete's picture

If the Greek people vote for suicide (stayinging with the Euro) then they deserve everything they get. This is their one chance to end the madness and they had better not blow it.

gatorengineer's picture

Seems to me the most likely outcome is the same as the last time.... No ability to form a government.  This time Syriza wins, but cant find enough votes to form a government.  Perfect outcome, another 6 week can kick......  Other thing dont forget the Greek Military  Wouldnt be at all surprised to see them step in and thats pro Euro.

Frankie Carbone's picture

It's not the people that vote that matter! It's the people that count the votes that matter.

VonManstein's picture

Funny how in the "bear case" in the column for the 10YR it suggests FED QE and then towards the end suggests gold at 1550.

not sure about that BofA