Ultra Bullish Options Bets Rolling In On Euro Zone ETFs

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February 24, 2017 12:26pm NYSE:FEZ NYSE:FXE

euro dollar

In what has not been the most eventful week in terms of ETF/Index options trading, we have noticed some interesting options flows in the Eurozone segment via two ETFs.


First off, in the fifth largest “Europe Equity” ETF in the U.S. listed landscape, FEZ (SPDR Euro STOXX 50, Expense Ratio 0.29%, $2.3 billion in AUM), we have seen August 37 call buyers, and these options do not typically trade on a daily basis in size.

Given FEZ’s high $33 handle in today’s trading which includes a  more than 1% sell-off in the underlying market today, these options are approximately 8.8% out-of-the-money at current levels — but being that they expire in August, there is of course substantial “time value” left in these options.

Year-to-date, FEZ has seen mild outflows to the tune of about $20 million leaving the fund.

In other action, in the largest “Euro” currency tracker FXE (Guggenheim CurrencyShares Euro, Expense Ratio 0.40%, $220 million in AUM), we have also witnessed summer options activity, specifically with June 107 call buyers there. More than 28,000 June 107 calls have traded this week, versus open interest of about 2,800 contracts in this June 107 line. These options, like those in FEZ, are considerably out-of-the-money at current levels (FXE is trading in the high $102’s, making the options about 4.8% OTM).

FXE has had negligible flows year-to-date, with a modest $5 million leaving the fund.

The Euro has tumbled considerably versus other world currencies, specifically the U.S. Dollar since Trump’s election last November, as FXE actually was trading in the $107-$108 range at that time, and the ETF is currently trading below its 50 day MA after weakness earlier this week.

In spite of the massive outperformance of the Euro currency versus the USD, Europe’s equity market is still managing to post a year-to-date gain, but in the case of FEZ it is still lagging the SPX by more than 400 basis points during this time frame. Not to mention, in the trailing one-year period, the SPX has more than doubled FEZ’s returns.

It seems evident to us that the options players in both FEZ and FXE this week are speculating that the Eurozone will see better times heading into the summer, and perhaps narrow the performance gap between European and U.S. equities — as well as in the Euro versus the USD.

FEZ-2017-02-24

The SPDR EURO STOXX 50 ETF (NYSE:FEZ) was trading at $34.01 per share on Friday afternoon, down $0.34 (-0.99%). Year-to-date, FEZ has gained 1.64%, versus a 5.52% rise in the benchmark S&P 500 index during the same period.

FEZ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #6 of 91 ETFs in the European Equities ETFs category.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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