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The Market Vectors Russia ETF Trust is lingering in five-year-low territory
Russia's woes have been fodder for the Street of late, and these troubles have been witnessed in the recent price action of the Market Vectors Russia ETF Trust (NYSEARCA:RSX) -- the largest exchange-traded fund (ETF) based on the country. Month-to-date, the ETF has shed 20.3% to trade at $15.58, and hit a five-year low of $12.50 one week ago. Speculators think there's more downside on the horizon, though, as evidenced by Monday's action in RSX's options pits.
Taking a quick step back, puts traded at 1.3 times the average daily pace on Monday. The vast majority of the day's action centered on RSX's January 2015 11-strike put, where two large blocks totaling 30,150 contracts were bought to open for $753,750 (number of contracts * $0.25 premium paid * 100 shares per contract).
This is the most the speculator stands to lose, should RSX settle above $11 at the close on Friday, Jan. 16 -- when the front-month contracts expire. Gains, meanwhile, will accumulate if the ETF is sitting below breakeven at $10.75 (strike less premium paid) at expiration -- territory not charted since February 2009.
Regardless, this trader was willing to pay up for her bearish bet. Not only did the Market Vectors Russia ETF Trust's (NYSEARCA:RSX) 30-day at-the-money implied volatility close at 67.2% yesterday -- in the 99th annual percentile -- but its Schaeffer's Volatility Index (SVI) of 67% rests higher than 88% of similar readings taken in the past year. Simply stated, premium on RSX's front-month options is relatively expensive at the moment.