NY Expo Case Study. CurrencyShares Euro Trust (FXE) is down 93 cents to $136.59 after the euro lost .0104 to 1.3687 against the buck. In the options market, one player appears to be bracing for additional short-term weakness in the European currency. They paid 15 cents for the Feb 135 – 136 – 137 put fly, 10000X. Looks like a new position and, since Monday is a holiday, a bet that FXE will drift towards $136 over the next 7 trading sessions (including today.) Here, the strategist wants the fund to edge lower during that time and for time decay to eat away at the Feb 136 puts. The Feb 137s could see modest appreciation and the 135s are bought as a hedge. If the trade works out, the 135s expire worthless.



It’s a relatively cheap fly, at only 15 cents (25 cents at current price) and offers a possible 85 cent pay-off (excluding commissions) if the fund drifts down to $136 per share by next Saturday’s expiration. The risk is the debit, or 15 cents (+ commissions). If the fund closes above $137 or dips below $135, the entire debit is at risk. The breakevens are $135.15 and $136.85. If FXE moves within that range, the fly will make money.

Currency Shares Euro Trust (FXE) is down $1.12 to $139.65 and not far from session lows after a poor auction of ten-year Treasurys sent bond yields and the dollar higher. The euro is under pressure and FXE, which tracks the EU/USD currency pair X 100, is seeing a third day of increasing put volume. 6,767 contracts traded, compared to 225 calls. July 138 puts are leading the flow, with some premium buyers probably positioning for the euro to dip below 1.38.

Stocks are trading in a tight range Tuesday. With not much news to guide the morning action, the S&P 500 traded in a narrow 9-point span.

Texas Instruments (TXN) is helping the tech sector after raising second quarter earnings guidance. The tech-heavy NASDAQ is up 18 points. American Express (AXP) is the best gainer in the Dow Jones Industrial Average, gaining 4.5 percent on news it will repurchase $3.9 billion in preferred shares from the government.

Chevron (CVX) is also helping the industrial average after crude gained $1.17 to $69.26. Gold is up $5.20 to $957.70 an ounce.

Overall, however, trading is mixed, with 16 Dow stocks higher and 14 lower. Relative weakness continues in some of the cyclical names–BA, UTX, and HD–for a second day. Consequently, the Dow has mustered only a modest 10 point gain.

The quiet trading has the CBOE Volatility Index (.VIX) down .93 to 28.84. Approximately 3.2 million puts and 3.8 million calls traded across the exchanges, a ratio of .84 (22 day average = .76).

GM June 1 calls is the most actively traded contract. Shares are up 25 cents to $1.46 despite the recent bankruptcy. Some players appear to be selling June 1 calls on the strength, with 74.4K contracts traded and 53 percent of the volume hitting bid-side of the bid-ask spread.

Meanwhile, solar names (CSUN, LDK, STP) are seeing relative strength and some players have been snapping up calls on JA Solar (JASO).

Bullish trading is also being seen in Etrade (ETFC), Mirant (MIR), and Officemax (OMX). Bearish trading is picking up in YRC Worlwide (YRCW), Royal Caribbean (RCL), and the Currency Euro Trust (FXE).

The CurrencyShares Euro Trust (FXE), an exchange-traded fund that tracks the USD/euro currency pair (X100), is up $1.35 to $140.42 and rebounding from 4-day, 2.9 percent, slide. In the options market, some traders seem to be using the strength to enter bearish trades. 5,635 puts and 1,300 calls traded. Buyers of July puts at the 136, 138, and 139 lines are leading the flow. Implied volatility is steady at 15.

Stocks bounced around in morning trading, but the Dow Jones Industrial Average has battled back and is holding modest gains midday.

Stock index futures rallied before the stock exchanges opened after the Labor Department reported that the US economy lost 345,000 jobs in May. The number was significantly better than the 520,000 loss economists had expected.

However, investors sold into the early strength, as the news sparked a sharp rise in bond yields and a rally the dollar, which also sent crude oil and gold prices sharply lower. After hitting a high of $70 in early trading, crude fell into the red shortly after the payroll data.

Another reversal in mid-morning trading helped lift the equity market and the situation had stabilized by midday. Crude is back to unchanged at $68.80. Gold is still reeling, down $21.40 to $96.90 on dollar strength.

The buck is still holding higher ground, as higher bond yields attracts flow to the buck. The dollar is up 1.45 to 98.07 on the yen. The euro is taking a hit and dipped back below 1.40 against the greenback.

Meanwhile, the benchmark ten-year Treasury is down 23/32nd, but well off session lows. The yield on the ten-year is at 3.83 percent, up from 3.76 percent pre-payrolls, but down from six-month highs above 3.9 percent.

The CBOE Volatility Index (.VIX) is down .96 to 29.22 as stocks recover and event risk has passed. The Dow is up 40 points. Approximately 2.9 million puts and 3.9 million calls traded by Noon eastern time, a ratio of .75.

Puts are active in Genco Shipping (GNK) as the dry bulk shippers (DRYS, DSX, EGLE, EXM) show relative weakness. Shares are down .81 to $24.36 and 10,000 Oct 15 puts traded, including a purchase of 9,600 for $1.30.

Bearish trading is also being seen in PharMerica (PMC), the Currency Euro Trust (FXE) and the Market Vectors Coal Fund (KOL). Bullish trading picked up in a number of the metals companies, including Alcoa (AA), AK Steel (AKS), and Cliffs (CLF).

The CurrencyShares Euro Trust (FXE) is up $2.50 to $139.81 after the euro jumped more than 1 penny after the Fed’s rate cut announcement. Options activity in the FXE is picking up as some investors use the ETF as a tool for playing the euro strength. 2,600 FXE calls have traded. The euro is at a two-month high of 1.39577 on the dollar. The yen rallied to 89.29 and the British pound to 1.545

The Currency Shares Euro Trust (FXE, news, chart, volatility) is down $3.57 to $141.08 after the euro fell “the most against the dollar since the introduction of the shared currency in 1999 as France and Belgium led a state-backed rescue of Dexia SA, the world’s biggest lender to local governments,” according to Bloomberg. The fund, which tracks the euro/dollar currency pair (x 100), is down 5.3 percent since last Monday. Today, 2,900 FXE puts and 1,300 calls have traded. Implied volatility is up 2 points to 17 and moving to record highs.

Most Active ETF Options XLF Aug 22 calls, SPY Aug 127 calls, QQQQ Aug 46 puts, QQQQ Aug 46 calls, QQQQ Aug 45 calls, QQQQ Aug 45 puts, SPY Aug 130 calls, QQQQ, Aug 44 puts, XLF Aug 21 puts Unusual Options Volume GLD, OIH, GDX, XME, UNG, DBA, IWN, DIG, XOP, TLT, IWO, IWD, RSX, XLV, MOO, DBC, XLK, KBE, XLP, KOL, PXN, FXY, SMH, DXD, PXN, URE, IWB, RSX, FXE, EWG, FXF, UUP 52 Week High IBB, FXM 52 Week Low EWA, IXP, EWJ, FXB, UTH, ITF, TTH, IDU, XLU, IWF, AUS, FAN, FRN, JPP, VEU

The ISE Euro Index (.EUI) is seeing bullish order flow. The EUI is a cash index that tracks the performance of the euro against the dollar. Like other ISE currency indices, it is dollar-based and therefore will move higher with the dollar. Today, for example, the EUI was able to shake off early weakness and trade up 33 cents to 65.23 after the euro fell to 1.533 against the buck (1/1.533 = .6523). The euro is seeing some volatility Thursday after the European Central Bank [ECB] voted to leave interest rates unchanged and ECB Prez Trichet noted downside risks to growth.

That, in turn, seems to be viewed as a bullish development for the dollar in the eyes of some traders. Volume in the EUI is running 40 times the usual, with more 5,000 calls and 720 puts traded on the session. 3,000 of the December 66s and 2,000 of the March 66.5 calls traded offerside.

Meanwhile, some players bought opened bear put spreads on the Currency Shares Euro trust (FXE), which is an exchange traded fund [ETF] that tracks the euro (moves inversely to the dollar). For example, at 10:45 Eastern time, an order of 1000 FXE September 152 puts traded offerside for $1.30 a contract on the PHLX. At the same time, 1,000 of the September 149s traded bidside for 40 cents a contract. The trade was repeated several times and the volume in those two contracts is more than 4,000 contracts (2,000 each), and well above exsiting open interest. Therefore, in this case, traders seem to be opening bearish spreads on the FXE, which would also represent bullish bets on the buck.

Implied Volatility Gappers (+) AGO, NAK, TZIX, SFI, FRE, FNM, MER, LM, ACAS, SAF, OPWV, PHH IV Gappers (-) NFLX, BRL, VEA, FDRY, TLAB, ROH, APPX, INTU, OEF, MFA, QLTI Rich (High IV/SV) TZIX, EVVV, FXEN, IOC, OMI, ALGN, HTCH, ELN, ITMN, NWY Cheap (Low IV/SV) BXG, FCSX, FED, OSTK, HBAN, UAUA,CDNS, FDRY, FHN, ARTC