Daily Options Report

Heard it from a friend who, heard it from a friend who, heard it from another...

REO Speedwagon

 

OK, that's possibly the most irritating song ever, though "Susudio" deserves some snaps for that.

OK, seriously, heard this on UUP.

I heard from a friend of mine is that a lot of the big quant desk's stepping into the etf biz was what helped because the retail investors were like it trades 10mm + shares a day so its liquid.

Just to rewind, yesterday we saw monster volume out of the blue there in the November 23 calls. And then today they halt trading in the UUP stock, apparently because they can't create more,

Yes, it's the perfect harmony of our national Deflate To Prosperity policies and the issues of tracking ETF's not actually tracking as well as one might reasonably expect.

So putting 2 and 2 together, call buying like UUP saw yesterday creates demand in the stock. Perhaps UUP can't create enough shares to meet the demand. I don't know off hand how UUP creates their shares, but I'll take a wild guess that it's some sort of currency swap with a 3rd party. That's a total guess, and I can't actually look it up until after I finish typing here. And even then, it's debable I will bother, I don't need a propectus to tell me this ETF is going to disconnect.

Did the call buyer know the creation problem was about to happen or did he actually cause the problem via his purchases? Interesting question, because if you can cause this yourself, that's kind of scary. I mean $4 million (of calls) seems like the rounding error of a rounding error for a currency desk.