Option Bears Flood Russia ETF on Flynn Reports

The appetite for RSX puts marks a change of pace among options traders

Dec 1, 2017 at 2:38 PM
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Reports that former national security advisor Michael Flynn is prepared to testify against President Trump sent shockwaves through the U.S. stock market, with the Dow flirting with at 350-point drop at its intraday low. What's more, the reports -- which suggest Flynn will confirm Trump told him to make contact with Russian officials -- sent the ruble dropping against the U.S. dollar, and has options traders taking aim at the VanEck Vectors Russia ETF (RSX).

Shares of the exchange-traded fund (ETF) were last seen 1.2% lower at $21.43. RSX is now in danger of closing at its lowest point since early September, and is testing its year-to-date breakeven level. Against this backdrop, RSX put options are flying off the shelves at four times the typical intraday pace, with traders apparently speculating on more downside for the ETF.

Roughly 11,000 RSX puts have changed hands, compared to just under 5,000 calls. Most of the action is attributable to a block of 10,000 December 21 puts that traded for $0.22 apiece. It appears the trader bought to open the puts for a total of $220,000 ($0.22 x number of contracts x 100 shares per contract), and will profit if RSX breaches $20.78 (strike minus premium paid) by options expiration on Friday, Dec. 21.

Today's appetite for RSX puts marks a change of pace for options buyers. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than three calls for every put during the past two weeks. In fact, RSX's 10-day call/put volume ratio of 3.20 is in the 82nd percentile of its annual range, pointing to a healthier-than-usual affinity for bullish bets over bearish of late.

 

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