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YPF Volatility Play

|Includes:YPF Sociedad Anonima (YPF)

Sociedad Annima (NYSE:YPF) is about to be nationalized by the Argentine government. This has been coming on for some time. Repsol, which owns a large percentage of the company, had been praying for a large payout. The Argentine government has stated the price will not be anything close to what Repsol had been hoping for. As a result the price has dropped dramatically in the last few days.

My guess is that Argentina pays something for YPF. The market is selling the stock with the idea that the price will be lower. I don't imagine this to be resolved quickly. As a result I would think there is an opportunity to work with the stock on the idea that the price will start to settle with the resulting volatility dropping.

I think the best strategy would be some kind of option straddle/collar where you are neutral on the stock direction, just waiting out the volatility to settle down and the option prices to decline. Likely selling calls and puts at the same time gathering current excessive option pricing with the idea of closing out positions in the next month or so.

Current price of YPF is $13.28 on 4/19/2012. Oct 12 25 call is 1.45. Oct 25 put is 12.90. Unfortunately there are no option prices closer to the current market.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: YPF