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Wow! What a wild ride National Bank of Greece (NYSE:NBG) is giving its investors! First, the company's share price fell from $3.22 to $0.63 from October to April (a fall of 81%). In April, the company's share price took off, moving all the way to $2.40 by mid May (an increase of 281%). In the last few trading days, the share price fell all the way to $1.28 (a fall of 46%) and we may be still far from the bottom. As the roller coaster has been swinging wildly, the shares will not be traded for a week when the stock's reverse split takes place. This is very important for investors to know because Friday will be the last chance for many investors to buy or sell this stock before things break loose. We have no idea of knowing how investors will react to the reverse split. However, we know that it will be a wild ride.

The Hellenic Financial Stability Fund (HFSF), a fund that was found to rescue Greek banks from going out of business, will be pumping Greek banks with money in the coming weeks and months. However, the Greek government has one condition before it saves these banks. The government wants these banks to collect 10% of the required funds from private investors and it is willing to cover 90% of the required funds. While some banks will have no trouble with collecting this amount, the country's largest bank National Bank of Greece carries the risk of not being able to collect the amount from the private investors.

The bank hopes to collect €1.17 billion ($1.51 billion U.S.0 from private investors by issuing new shares. The issuance of the new shares will come in two steps. First, the company will have a 1-for-10 reverse split. Next, the bank will issue new shares at $5.5 per share for those who have a warrant to buy them at that price. If we ignore the reverse split, each share will be sold for 55 cents, which is far below today's share price of $1.28. Now, in order to be able to buy the company's shares at 55 cents, one has to own shares before the split takes place (Friday is the last chance) because only current investors will be able to take advantage of this special sale.

The bank is making its new shares cheaply available in order to make sure that the shares find buyers. This is NBG's last chance before it gets nationalized by the Greek government. If this happens, investors of the bank will lose all their money. The price of newly issued shares was determined by applying a 50% discount to the company's 50 day moving average value.

Here is the bad news though: investors who don't have the money or desire to buy the new shares at 55 cents (and American investors who will not even be given warrants) may get burned because the issuance of new shares may drop the current share price even further. Many investors will sell their newly acquired shares without wasting time as they can earn the difference between 55 cents and the share price at the time of acquiring these new shares. If the share price is $1.00 by May 30th, many investors will not waste much time before selling the shares they acquired for 55 cents and this may lead to further price depreciation.

This bank is a highly speculative play which could swing to either side quite wildly. At the moment, the options trade figures reflect this too. Currently NBG trades for $1.28 and if one were to write a covered call expiring in June with a strike price of $1.50, he or she would pocket $0.15 to $0.20 in premium, which reflects a yield of 11% to 16%. Keep in mind that far more calls were sold than puts in the last few days, which means that options investors are rather hopeful for the company's future.

Last week, I bought a small number of NBG shares at $1.44 and wrote covered calls expiring in June with a strike price of $1.50 which brought me a premium of $0.20 (a yield of 13.88%). First, the stock price moved upwards to $2.40, and while I was upset about leaving money on the table, it fell down to $1.28. Now there is absolutely no way of knowing where the next stop is. The stock could go to $3.00 or $0.30 within the next couple weeks. This stock is for highly speculative players who are willing to take a large haircut. I would only recommend buying a small number of shares of this company if you felt so inclined to gamble with it.

Recently, Alpha Bank, which is another Greek bank in similar situation, successfully raised capital by the same methods. American brokers rather than the investors that trade the ADR shares will own the warrants associated with the stocks. When Alpha Bank had its capital raise, American brokers sold existing warrants and gave the proceeds to the investors who were holding ADR versions of Alpha Bank shares. Will this happen with National Bank of Greece? We will have to wait and see because there aren't any announcements on the matter yet.

At the moment, National Bank of Greece is in a very complicated situation. Depending on how well the capital raise goes, things will be either extremely bullish or extremely bearish. High volatility will be here for a while and I suggest people to stay away from this company for the most part. If you still want to buy some shares, try to buy a small amount and try to buffer some of your possible losses by selling covered calls. Keep in mind that if you want to buy or sell this stock, Thursday is the last chance before the reverse split actually happens.

Disclosure: I am long NBG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have a very small amount of shares.

Source: National Bank Of Greece: Trading Halts Between May 24-30