Traders Bet On Euro’s Decline As Italian Referendum Vote Looms

Analyst Paul Weisbruch brings to light some unusual options activity in a currency ETF that’s likely linked to the highly important Italian referendum vote set to take place this weekend.

We saw upside call buying in a Bear levered currency fund yesterday, specifically involving the January 28 calls in EUO (ProShares UltraShort Euro). Speculating on higher prices in this fund is in essence a play on a depreciation of the Euro against the U.S. Dollar.

EUO is off of its recent highs from just before Thanksgiving, as the Euro has appreciated a bit against the USD in recent sessions, but this looks like a play on a resumption of pressure in the Euro versus the Dollar. It also of course makes sense to watch UUP (PowerShares DB U.S. Dollar Bullish) amid this activity in EUO as well as USDU (WisdomTree Bloomberg U.S. Dollar Bullish).

The motivation behind these recent currency bets could be tied to the Italian referendum vote scheduled for this Sunday. A “yes” vote for that measure could have big consequences, according to CNBC:

The reforms would remove power from the Senate and mean that proposed laws would only require the approval of the lower house of parliament, as opposed to the current system which requires approval from both houses.

This move would make it easier for subsequent laws and actions to be passed by the government, paving the way for Italy to propose a vote to leave the EU, similar to Britain’s Brexit.

No matter which way Italy votes on Sunday, investors should expect more fireworks in the forex (and currency ETF) spaces in the near future.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

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 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.