Three-year-old ETF becomes only game in town for investors hoping to play Greece volatility

For Greek stock speculators, a three-year- old security listed in the U.S. was just about the only game in town this week. The Global X FTSE Greece 20 ETF traded a record 14 million shares over three days, plunging 19% on Monday and then regaining half the loss on Tuesday and Wednesday. It dropped 0.9% on Thursday at 1:10 p.m. in New York. A similar fund with listings in Europe was suspended all week, making the U.S. version the only means to place bets on Greek equities after regulators closed the Athens Stock Exchange. With few of its underlying stocks trading, the ETF was transformed from its normal function of tracking Greek equities into a more speculative role for traders trying to predict where they'll go. The fund worked just as it should have: investors who were concerned were able to hedge their exposure, while the bulls could put on positions, according to WallachBeth Capital Eric Mustin. (More: Market reaction to Greece doesn't signal end of bull market) “Given that Greece itself is closed, it's a positive for the market that there's still some avenues available to investors,” Mr. Mustin said. “There's a variety of opinions out there, there's no real consensus on where the Athens Stock Exchange is going to open. Clients who have international focus or emerging market focus have looked at GREK to express their opinion.” GREK is the ticker symbol for the U.S. ETF. SURPRISE VOTE After Greek Prime Minister Alexis Tsipras surprised the world by announcing a referendum on creditors' demands, the country was put on hold, with its banks and exchange shut until July 6 and capital controls in place to shore up the financial system. More than 4.6 million shares of the ETF changed hands on average each day this week, compared with 1.2 million in the month before that. A daily mean of 27,300 options on the fund traded in the past three days, also a record. Americans are the biggest foreign holders of the Greek stock market, whose value is about the size of ship operator Carnival Corp. (More: El-Erian sees 85% chance of Greek exit, putting him at high end of Wall Street expectations) As Greek talks intensified, the ETF became increasingly popular. Investors have added $281 million to the fund this year, including $3.2 million on Monday. Its market value reached a record $367 million last week. Traders also used American depositary receipts of National Bank of Greece SA to place their views. They fell 12% in three days. SUNDAY DECISION Now everybody is waiting to see what the Greeks will decide on Sunday. Tsipras is calling for a rejection of creditors' demands, and polls suggest it's too close to call. Finance minister Yanis Varoufakis said he'll quit if voters don't back him. Benedict Goette, founder of asset-management firm Compass Capital AG in Zurich, expects volatility to persist, whatever the outcome of the referendum. Prices of options hedging against swings in the ETF in the next month are near the record reached on Monday. They're seven times more expensive than those on a fund tracking the Standard & Poor's 500 Index. “You don't have any positive outcome,” Mr. Goette said. “There isn't a clearly visible path of how this could become one big unified quick solution. You would need a dramatic shift in all sorts of political stances. The market could be disappointed soon again.”