It is often said that one has to “buy when there is blood on the streets“, meaning that when a crisis hits that is often the time to act without hesitation and grab the opportunity with both hands.
Right now, Turkey finds itself in the depth of political crisis which if not resolved could lead to a larger economic meltdown. During April, Turkish President Recep Tayyip Erdogan announced that the country would hold a parliamentary and presidential elections during June, more than a year earlier than they would take place. The decision comes as the Mr Erdogan seeks to implement reform to allow the government to make stronger decisions that would shape the future of the country.
This is not the first time that Turkey has been in crisis mode. In 2016, the country survived a failed military coup which led the President to crack down on dissent which has lead to thousands of people including political opponents, civil servants, journalists and police being jailed.
While we have not experienced a crisis to this extent in South Africa in recent years, it is noted periods of extreme pressure have always been the best of opportunity to accumulate assets or participate in trades that are often contrary to the general/mass consensus.
Have a look at the chart of the South African Rand below:
1. September 2001: Terrorist Attacks, falling commodity prices and SA Currency Crisis
2. October 2008 to March 2009: Global Financial Crisis
3. December 2015: “Nenegate”- the firing of then finance minister Nhlanhla Nene.
Although not easy to identify at the time, each of these moments in a country’s history represented a buying opportunity.
Traders could look to participate via by buying call options where the maximum risk the premium paid. I am looking six months out, to give the this idea time to work.
Underlying Price: $33.81
Premium: Around 3.70 at the last close