Cautious trades continue to build in the energy space after a
big rally this summer.
optionMONSTER's tracking systems detected heavy call buying in
the Direxion Daily Energy Bear 3x exchange-traded fund, which
moves in the opposite direction as the energy sector. Most of the
activity focused on the October 8 calls for $0.95 to $1. More
than 45,000 changed hands against open interest of just 418
Because ERY is leveraged to move in the opposite direction as the
sector, those calls represent a bearish bet on energy. They're
expressing a similar sentiment as
in SPDR Energy Fund detailed by Chris.
ERY rose 0.24 percent to $8.40 in afternoon trading. It's lost
more than two-thirds of its value since July as energy stocks
rallied. Given its reliance on derivatives to generate its
performance, the fund is susceptible to losing value from time
decay if the index remains in a range. But if it drops sharply,
the fund could really benefit from the volatility increase.
The fund typically trades fewer than 1,000 contracts in a
session, but today volume is almost 60 times normal amounts.
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