Direxion Daily China Bears 3x Shares ETF (YANG) Booms on Mainland Meltdown

The Direxion Daily China Bears 3x Shares ETF (YANG) continues to outperform the broader market

by Alex Eppstein

Published on Jan 4, 2016 at 2:06 PM

While China's market meltdown is ushering some exchange-traded funds (ETFs) to new lows, other equities are on the rise. Case in point, the Direxion Daily China Bears 3x Shares ETF (NYSEARCA:YANG) is 10% higher at $109.06. Consequently, calls are changing hands at six times the usual afternoon clip.

Leading the way is the April 150 call, where buy-to-open activity is detected. By purchasing these positions, traders are expressing conviction that YANG will topple the deep out-of-the-money 150 strike by April expiration -- putting it on the doorstep of its annual highs from last August.

This bullish betting represents a break from the prevailing pattern. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), calls and puts have traded in parity. However, the corresponding 10-day put/call volume ratio of 1.00 registers in the 87th percentile of its 12 month range, hinting at a bias toward bearish bets over bullish.

Technically speaking, though, the Direxion Daily China Bears 3x Shares ETF (NYSEARCA:YANG) has outperformed the broader market in recent months, just as it is today. Specifically, the ETF has bested the S&P 500 Index (SPX) by nearly 26 percentage points during the past 40 sessions. As such, some of the bearish bettors may actually be shareholders seeking a downside hedge.

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