The euro has staged a massive rally in the last six weeks, and
now traders are getting short using options and an exchange-traded
optionMONSTER's tracking systems detected huge call buying the
ProShares UltraShort Euro (
) exchange-traded fund, which moves about twice as much as the
Euro/U.S. dollar exchange rate, but in the opposite direction. The
November 19 contract accounted for the bulk of the activity,
trading more than 32,000 times against open interest of just 1,971.
Most of the volume priced for $0.90 to $1.
The EUO is up 0.47 percent to $19.19 in afternoon trading. The fund
has lost 17 percent of its value since the beginning of September
while the Currency Shares Euro Trust (
), which tracks the currency directly, has climbed 9 percent over
the same period (purple line on chart).
The euro had been gaining ground as investors resumed a long-term
trend of rotating reserves into the common currency and away from
the greenback, and as strong overseas growth drew investors back to
international stocks and commodities. Emerging-market currencies
have done better than the euro, prompting countries such as Brazil
and Thailand to restrict capital inflows.
Today's call buying represents a bet that the euro will suffer at
least a minor pullback. The trade may represent a hedge on a broad
portfolio that is inversely correlated to the dollar. It also comes
hours before the Federal Reserve releases minutes from its last
meeting, scheduled for 2 p.m. ET today.
Overall options volume in the fund is 29 times greater than
average, with calls accounting for 95 percent of the activity.
(Chart courtesy of tradeMONSTER)