Bullish on the Benjamins?

• Posted by Adam Warner
• on November 4th, 2009

I wanted to place some money on the Fed going to negative interest rates, no takers though (yes, I know what “real” rates are).

Anyway, someone maybe thinks Ben’s rain-making party is about to end. Huge buy interest in the Powershares DB US Dollar Index IDX Bullish Fund (UUP) November 23 calls. 264,247 have traded so far as I type, vs. an open interest of 40,349. They’ve been quoted .10-.15 every time I’ve checked, so assume the price is there.

Remember this isn’t a specific play, like say they’re buying DNDN calls or HGSI calls. Maybe someone is buying cheap spec. on a dollar rally, or maybe someone is already short the dollar or long stocks or long gold or long oil or long Brazil or….well, you get the idea. If the dollar does reverse now, we’ll point to this guy as brilliant, but it’s extremely unclear what is going on with this trade, there’s an awful lot of moving parts and cross-hedges and carry trades involved. We saw all sorts of OTM VIX call speculation all summer and it all meant absolutely nothing directionally, I suspect this trade has little predictive value either. But who knows.

Update: Adding that the $4 million or whatever someone’s spending on these sounds cheaper if he’s not US based and using our depressed dollar to buy them….OK, that’s too 2nd derivative, nevermind.

 

 

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