Call Volume Soars on European ETF FEZ

SPDR Euro Stoxx 50 ETF (FEZ) call options have been popular as the ETF trades near annual highs

Mar 22, 2017 at 3:46 PM
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While the rise in U.S. stocks since Donald Trump's election win has gotten most of the publicity, international securities have been gaining, too. For instance, the VanEck Vectors Russia ETF (RSX) has put in solid returns since November, and options traders have been betting on more upside. The SPDR Euro Stoxx 50 ETF (FEZ) has also been strong, up 16% since its December low, and notching an annual high of $36.50 just yesterday. And even with an uncertain French election looming, options traders are targeting higher highs for the exchange-traded fund (ETF). 

Long Calls Remain Strategy of Choice for FEZ Options Traders

Starting with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the ETF has a 10-day call/put volume ratio of 3.73, meaning nearly four calls have been purchased for every put in the last two weeks. Moreover, there are now 592,774 FEZ calls outstanding, representing a 52-week high. 

Trade-Alert is highlighting a substantial options trade that crossed yesterday. It appears one ambitious speculator sold to open 20,000 May 36 calls for $1.22 each to offset his purchase of 60,000 August 39 calls for 42 cents each. This trade would suggest confidence in FEZ continuing its rise in the months ahead. 

It certainly seems to be a good time to buy short-term FEZ options. Specifically, the ETF has a Schaeffer's Volatility Index (SVI) of 15%, which comes in lower than 85% of all similar readings from the past year. This means unusually low volatility expectations are currently being price in. 

FEZ Short Interest Surges

Outside the options pits, however, it appears a number of traders are betting against the SPDR Euro Stoxx 50 ETF (FEZ). In the last two-week reporting period alone, short interest on the ETF jumped by 36.5%, and now rest just shy of last June's multi-year highs. And, of course, there could always be a connection between rising short interest and increased call buying, as shorts may be using call options to hedge against an upside move in FEZ shares. 

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