Yep, at one point this market action happened in the US - when the market was hoping for QE3.
We've had bad figures from Germany and the rest of Europe for weeks now but the market has shrugged it off and has bounced (since the Cyprus fiasco). What this tells me is that there must be a lot of expectations baked into next week's ECB decision on Thursday.
DAX 7800 Straddles (at time of writing) are offered for 155.90 points for the May 3 expiry. You could probably even get them for 154 points if you fired orders in slightly better than mids. These are vols of about 16.5 according the Interactive Broker's inbuilt calculator and equates to a breakeven of +/- 2% of spot.
Here's a chart of the DAX with the straddle's breakevens marked. I like this trade as further ECB measures could drive the DAX back to its highs of the year. If the ECB disappoints, and with high expectations priced in, I could also quite easily see the DAX dive back to its lows.
Furthermore, in the coming week, comments from various finance ministers, central bankers and so on will be closely watched by the markets and could possibly provide some gamma scalping opportunities to "cheapen" the straddle before Thursday.
Let's track this trade:
Long DAX 7800 Straddles @ 155.90
Note that it doesn't include NFP as the straddle expires at 7 am New York time.
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