Bearish Dollar ETF Put, Call Volumes Rise on Volatility Bet

Options volume for an exchange-traded fund that replicates a short position on the dollar against currencies such as the euro and yen surged to a record amid bets on reduced volatility in the greenback.

Investors sold 25,000 September $27 calls of the PowerShares DB US Dollar Index Bearish Fund and the same number of September $27 puts, a strategy known as a “straddle.” The trade is a bet on limited volatility, options strategists at Susquehanna Financial Group LLP in Bala Cynwyd, Pennsylvania, wrote in a report today.

The trade accounted for almost 100 percent of total volume. The four-week average volume is about 200 contracts a day. The ETF fell 0.3 percent to $27.41.

Put open interest was 397 yesterday, and call open interest was 6,194.

Calls give the right to buy 100 shares of a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. 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: Cecile Vannucci in New York at cvannucci1@bloomberg.net.

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

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