Markets

Trader believes dollar strength will fade

One investor apparently thinks that the dollar's strength is a thing of the past.

optionMONSTER's tracking systems detected a surge of activity in the PowerShares DB U.S. Dollar Index Bullish exchange-traded fund, which tracks the U.S. Dollar Index. A block of 68,000 March 23 calls were sold for $0.29 and an equal number of March 24 calls were bought for $0.14.

Both legs of the transaction occurred against open interest, suggesting that a previously existing bullish position was closed. It appears that the investor had previously bought the 23s and sold the 24s, looking for the UUP to push higher. But now he or she is exiting the trade while collecting $0.15, which is probably less than what was paid to open the position.

The UUP is down 0.25 percent to $22.33 today but has risen 6 percent since the beginning of September. It's been climbing as worries about sovereign debt in Europe cause investors to dump foreign currencies.

Today's option action reflects a belief that trend will now reverse. It's the biggest transaction in the market so far in the session.

The trade could have also been a new credit spread , which would reflect a similar belief that upside is limited in UUP. (See our Education section)

Overall option volume is 9 times greater than average in the fund.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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