Dollar ETF Call-Option Selling Raises Volume to Triple Four-Week Average

An investor abandoning a bullish options bet on the U.S. dollar pushed volume for contracts on an exchange-traded fund tracking the currency to triple the four- week average after America added fewer jobs than forecast.

About 105,000 calls giving the right to buy the PowerShares DB US Dollar Index Bullish Fund changed hands in a single trade of March $24 calls originally purchased on Oct. 27, according to strategists at Susquehanna International Group LLP in Bala Cynwyd, Pennsylvania. The trade at 9:50 a.m. New York time was more than triple the 33,582 average daily volume for calls on the ETF, which slid 1.2 percent to $22.88 at 4 p.m. New York time.

“A sea change in attitude toward the dollar following today’s weaker-than-expected employment report inspired one options player to cut and run from a large bullish position,” Caitlin Duffy, an equity options analyst at Greenwich, Connecticut-based Interactive Brokers Group Inc., wrote in a report to clients.

The dollar slumped against 16 currencies and tumbled to a three-week low versus the yen as U.S. employers added less than one-third as many jobs as forecast last month, keeping unemployment near a 26-year high and spurring speculation the recovery is faltering. The dollar fell 1.4 percent to 82.63 yen at 4:23 p.m. in New York.

The 105,000 contracts account for more than 10 percent of the 978,395 total number of options linked to the ETF. The contracts were sold at 24 cents, down from 34 cents on Oct. 27, according to Susquehanna and Interactive Brokers.

Whomever initiated the trade “might be throwing in the towel on hopes for additional gains in the dollar after the buck slid on disappointing jobs data,” Frederic Ruffy, senior options strategist at WhatsTrading.com, a New York-based provider of options-market analysis, wrote in a note to clients.

Calls give the right to buy a security for a certain amount, the strike price, by a set date. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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