Einhorn said Greenlight has been buying long-dated options on much higher interest rates in Japan and other developed regions, giving the firm the chance to make big profits from a jump in rates. The options, bought from major banks, are tied to interest rates four to five years out, Einhorn noted. In the case of Japan, rates have been very stable in that country for many years, so the options were relatively cheap. Einhorn said the "asymmetry" of that trade was interesting. If rates jump suddenly in Japan, Greenlight stands to make "multiples" on its positions, he added.
The dollar collapse scenario that concerns Einhorn is certainly part of a double edged sword. It could happen, just keep in mind that at this point it has to come from international panic, sinceBernanke hasn't printed any money since February.
The smart way to play this market is to bet on volatility. Which ever way the pendulum is going to swing it is going to swing dramatically. Obviously if there is a dollar collapse, it will be huge. But a strengthening dollar will also be a major move in the other direction. Bet the volatility.