PMI EUR Signal - Feb. 4, 2013

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By: Andrew Keene

The euro rallied over the weekend to touch a 14 month high on news that the European Central Bank's balance sheet had contracted. The ECB, which has not purchased sovereign debt for 45 straight weeks, was repaid 137.2 billion euros by banks last week with another 3.5 billion euros influx this week. The funds come from repayments of three-year emergency loans to stabilize bank balance sheets, and amount to roughly 4.8% of the 2.93 trillion euro's on the Frankfurt-based central bank's balance sheet.

Other positive news trickled out of Europe last week, including two positive unemployment numbers. The first was a downward revision of the November number to 11.8%, the second a below-expected but still-high 11.7% for December. PMI (Purchasing Manager's Index) data showed the battered manufacturing sector may have hit bottom and begun to rebound. Finally, inflation fell by 0.2% creating the possibility for the ECB to cut interest rates in an effort to further revive the economy.

134 straddle for $3.00
risk: $300 / 1 lot
reward: unlimited
B/E: $131 and $137

Andrew Keene spent 10 years as an independent equity options trader on the Chicago Board of Options Exchange, during which he spent the majority of his time as a market-maker for over 125 stocks. Andrew currently trades futures, currencies and commodities. When he's not trading, Andrew appears on top business television shows including CNBC's Squawk on the Street, Street Smart on Bloomberg TV and First Business, a show that is syndicated across the United States. Andrew graduated from the University of Illinois with a degree in Finance with a concentration in Accountancy.