Volatility Chart Du Jour: UUP

• Posted by Adam Warner
• on November 5th, 2009

I’ve never looked at the volatility graph’s in UUP, so here we go…

And… well I have to say, this is pretty underwhelming. Ben and Tim’s Strong Dollar Policy may well take the American Peso to 0, but it’s sure happening at low volatility. You don’t often see 12-13 volatility as securely overpriced.

Well, I guess there was a blip of realized volatility in June, but otherwise, quite the yawner. And you don’t really have to worry about a takeover (at least I think you don’t). So what’s the incentive not to be a net options seller here? Not sure, other than I guess some Whale can walk in and buy 330,000 “cheap” calls. And .15 calls short in size create a notoriously tough position to manage if it goes thru strike.

When the VIX had all those odd OTM call prints, I guessed that the buyers were pro’s simply offsetting some sort of volatility exposure. I imagine this is something similar, some pro exposed in some way to a dollar lift and hedging his bets. Not sure it really matters though what’s ultimately behind it.

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