Russia-Ukraine risks: looking for hedges?

Russia-Ukraine risks: looking for hedges?

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RUSSIA-UKRAINE RISKS: LOOKING FOR HEDGES (1101 GMT)

It's not the base case for many traders but an escalation of Russia-Ukraine tensions into a war-type situation is still a big risk which investors need to watch closely, especially as markets seem to have priced in little or nothing so far.

And for UBS it's time to consider ways to hedge.

According to strategists at the Swiss investment banks, it looks that markets have been following the "2014 template" which saw little impact to international assets through Crimea tensions & Russia sanctions. But this time could be different.

"Troops are amassed on both sides of the Russia-Ukraine border; NATO is pushing back harder than in 2014; the US and EU are threatening much more punitive sanctions that could cut trade and financing flows to/from Russia; energy and metals markets are already very tight. Given that the market can arguably be surprised only in one direction, it's wise to look for hedges," they wrote.

Here's what they recommend looking at for protection.

(1) DAX put spreads

(2) SXEE (European Oil & Gas) call, SX7E (European Banks) put