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UUP Call Volume Surges As Investors Bet On Major Rise In Dollar, Equities Drop

Tyler Durden's picture




 

Assuming some massive UUP March call position is not being rolled, today was the second biggest volume day in UUP March Calls ($23 strike) ever. We believe this is not a roll as the trade did not have the pre-negotiated look of a usual roll, which does not move the actual price of the option itself materially. The March $23 strikes have been trading in a wide range opening just north of $0.70 and last traded $0.79/0.80. This is a major bet on future dollar strength. And, by implication, a leveraged bet on major market downside.

h/t Bill

 

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Fri, 02/05/2010 - 14:11 | 219265 MsCreant
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And as soon as some treasuries get sold, does Ben go shopping and short the shorts?

Fri, 02/05/2010 - 14:15 | 219274 Dark Helmet
Dark Helmet's picture

I keep telling the inflationists that they are right, but not yet! We are in for a double dip, and the dynamics of deflation are going to reassert themselves in the short term.

The people going gold-crazy right now are committing the investor mistake of acting short term on the basis of very long term thinking. We won't see inflation until the real recovery happens and the fed finds itself unable to vacuum up all the liquidity they've spewed everywhere.

 

Fri, 02/05/2010 - 14:26 | 219288 hack3434
hack3434's picture

"We won't see inflation until the real recovery happens" 

I like how Jim Sinclair puts it..."Hyperinflation is NOT an economic event, it is a currency event"


Sat, 02/06/2010 - 00:13 | 220162 D.M. Ryan
D.M. Ryan's picture

"The people going gold-crazy right now are committing the investor mistake of acting short term on the basis of very long term thinking."

Well put!

Fri, 02/05/2010 - 14:22 | 219281 yabs
yabs's picture

thats assuming there ever will be a recovery

Fri, 02/05/2010 - 14:27 | 219292 Dark Helmet
Dark Helmet's picture

There will be eventually. Eventually the boomers will die off, the pension liabilities will either disappear, be inflated away, or default. etc...

But I do not expect to see an actually good economy for quite a while. An anemic economy with structurally high unemployment punctuated by recessions is the new normal.

Fri, 02/05/2010 - 14:30 | 219299 Yophat
Yophat's picture

or that the recovery is in the terms of what we expect i.e. no new currency or some other shenanigan

 

and since the gov is preparing for martial law (see Obama's last executive order -  http://yophat.blogspot.com/2010/01/executive-order-fema-governors.html)  all bets are just bets at the table!

Fri, 02/05/2010 - 14:26 | 219286 Psquared
Psquared's picture

Confirms the carry-trade theory doesn't it.

On another front, I am paying close attention to commodity prices. Oil has dropped again and is not below $70 a barrel for Brent March delivery. All of this is due, IMHO, to the Euro scare. Seriously, where would you put money these days. Clearly the dollar is the lesser of several evils.

So much for improved exports.

Fri, 02/05/2010 - 14:33 | 219307 Yophat
Yophat's picture

Oil is way overpriced....demand has fallen off a cliff (refineries at 80's levels).....Saudi needs to take another 4 million b/d of production off the table or we need to bomb Iran in order to keep prices elevated.

Filled the strategic reserve in on Dec 27....I've heard rumors China's reserves are nearly full as well as Japan's....

Fri, 02/05/2010 - 14:32 | 219304 RoastingBankers
RoastingBankers's picture

lmfao at longs

Fri, 02/05/2010 - 15:03 | 219365 E pluribus unum
E pluribus unum's picture

Thank God I put everything I own into REITs. They never go down. <snark>

Fri, 02/05/2010 - 15:12 | 219382 Anonymous
Anonymous's picture

Yeah, I wouldn't want to be long right now... Or have invested long in John Paulson's new Gold hedge fund:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPMbZAOfYDcQ&pos=4

Wow, lost 14% in one month? Annualize that and you get...

WAIT, I forgot, someone tell him to not worry, as Gold is really just a store of value, so even if it goes down it... Doesn't matter. What is 14% of $32 billion when you have 'peace of mind'...

Fri, 02/05/2010 - 14:32 | 219305 Dark Helmet
Dark Helmet's picture

Another thought...

Won't a rising dollar have the side effect of killing our precious snowflake the housing market? Aren't house prices basically propped up in nominal terms by liquidity (a.k.a. inflation local to that market)?

Fri, 02/05/2010 - 14:35 | 219311 Yophat
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not including banks holding inventory, Fed repressing rates, etc etc etc

Housing is set for another major collapse this year!  Especially if interest rates shoot up due to debt rollovers!

Fri, 02/05/2010 - 15:11 | 219381 Assetman
Assetman's picture

The biggest beneficiaries from this deflationary round are the USD-- and US Treasuries.

Timmy and Ben have been waiting for pieces of Europe (and China) to crumble.  Now that it's finally happening, there's a window beginning to open that will result in a global flight to quality. 

This is EXACTLY what TPTBs were hoping to see-- they are not likely to prop the equity markets, either.  They want the opportunity to fill the bucket with low rate, long duration notes.  It's coming... they just don't need to mess it up by putting things like Agency libabilites off balance sheet.  Call it a "Come to Papa" moment.

Once we get past the Spring season, Benron will be back in full reflation mode.  Why?  Because I think there are still a few more bullets left in the chamber... and we probably need the market prop to keep confidence from going totally in the sh$tter.

Fri, 02/05/2010 - 15:35 | 219440 Dark Helmet
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So do you think this is a buying opportunity for $CDN, $EUR, GLD, etc.?

Fri, 02/05/2010 - 16:24 | 219556 Assetman
Assetman's picture

Not now.  But there will be later this year.  The longer term trend for USD is down, imo.  I'll be adding to $CDN and GLD down the road... as I had before the last reflation trade.   At some point, the reflation trade will explode into something more special-- but not this round.

I'm not touching $EUR... I actually think things may get worse there than here in the US.  Bring back the DM, and maybe we can talk. :)

Fri, 02/05/2010 - 14:47 | 219332 lizzy36
lizzy36's picture

andy look at the ETF outflows (over the last 2 weeks) on these precious metals and commodity ETF's.massive. 

U.S. reserach note from a firm covering 44 prescious metal ETF's, AUM of $57.3B, saw $680m of outflows yesterday. 

Fri, 02/05/2010 - 14:36 | 219312 Mrmojorisin515
Mrmojorisin515's picture

would someone who is much more versed in trading and balance sheets then i myself am, take a look at autozone and tell me how anyone could justify a stock price of 154.61?  I would greatly enjoy to hear how it could possible be worth that much, being in auto parts advanced seems like the better managed/better balance sheet to me.

Fri, 02/05/2010 - 15:07 | 219373 E pluribus unum
E pluribus unum's picture

But won't these unemployed people need an iPad to day trade while hospitalized?  AAPL - Buy Buy Buy

Fri, 02/05/2010 - 14:40 | 219319 Anonymous
Anonymous's picture

Pontification

I am sitting her thinking that we are on our way to retest 666 within 90 days. Why? 1) Nobody I know trusts his or her " investment advisor" anymore. 2) Nobody I know wants to be the biggest loser in the eyes of his or her boss/spouse twice in the last 24 months, thus nobody trusts oneself anymore. 3) All equity market exit ramps are clearly marked and greased by the US Treasury.

...unexpectedly...

Fri, 02/05/2010 - 14:40 | 219321 Anonymous
Anonymous's picture

Tyler, the huge volume on both the $23 and $24 calls (March and Jan respectively) all came in at or just above the bid. These were sell orders. I think they could be booking profits from putting on this trade last fall.

Fri, 02/05/2010 - 14:42 | 219328 Mrmojorisin515
Mrmojorisin515's picture

i was more along the line of its eddie lampert and his boyz at GS

Fri, 02/05/2010 - 14:43 | 219329 Mrmojorisin515
Mrmojorisin515's picture

i bet CRAMER LOVES AZO

Fri, 02/05/2010 - 14:43 | 219330 lizzy36
lizzy36's picture

and well through 1050 on spx......

Fri, 02/05/2010 - 14:49 | 219337 Catullus
Catullus's picture

http://www.rasmussenreports.com/public_content/business/general_business...

there are days when I get glimmers of hope for the sheeple.

Fri, 02/05/2010 - 15:05 | 219371 Anonymous
Anonymous's picture

Not sure why you would:

"However, all polling on federal spending and deficits must be viewed with the recognition that only 35% of voters realize that the majority of federal spending goes to just defense, Social Security and Medicare."

Typical histrionics, you are citing as heartening a poll that rejects Keynesian economics by people that don't even know what they are talking about?

In other news, 82.3% of the public said they would never eat a Yuca french fry, however one must realize that of those polled, only 32% new what a Yuca french fry was.

Excellent, and keep using the word 'sheeple', it really enhances your credibility.

Fri, 02/05/2010 - 15:48 | 219485 Yophat
Yophat's picture

He who writes the check makes the rules....with gov writing more payroll checks than private now...say adios to voter independence!

Fri, 02/05/2010 - 16:23 | 219553 Catullus
Catullus's picture

I find reading articles enhances credibility. 

Those polled were not asked if "they support Keynesian economics".  Those polled were asked on their support for tenets of Keynesian economic policies.  It seems a majority of people understand that deficits are the result of the unwillingness of politicians to lower government spending.  Also, a majority seem to understand that deficits are harmful and that the deficit should be lowered. 

Fri, 02/05/2010 - 16:43 | 219622 Anonymous
Anonymous's picture

I find that knowing something about economics helps too.

First off I would recommend knowing what some of the tenets of Keynesian economics are:

http://www.econlib.org/library/Enc/KeynesianEconomics.html

Then re-visit this overly-simplistic poll and let me know if me asking someone 'do you support a lower deficit' could conceivably be construed as a complete refutation of Keynesian economics.

Last I checked, the bulk of the debt and deficits are due to items NOT related to the attempt at a counter-cyclical combat of the business cycle - AGAIN which are defense, social security, and medicare.

Ask people if they would like to cut all three of those and I bet this poll changes drastically.

But like I said, nice histrionics though.

Signed,

Sheeple

Sat, 02/06/2010 - 00:54 | 220186 Catullus
Catullus's picture

I do know economics.  And yes, construing "do you support a lower deficit" as a refutation of Keynesian economics is correct.  End of story.  But you could go ahead and read the link you posted which said "But Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to fluctuate. If government spending increases, for example, and all other components of spending remain constant, then output will increase."  So asking someone the simple questions of "do you support a lower deficit" and "do increased government deficits cause harm" and "should the government lower the deficit by lowering spending" is a refutation of a key tenet (and central tenet) of Keynesianism.

There is such a thing as military Keynesianism, so check again about the defense thing. And last I checked, these wars the US fights aren't too popular.  I don't have a poll.  I'm just guessing. Google it.

As for Social Security and Medicare, it might help if that poll question included an accural accounting perspective and not the just cash accounting garbage the US government has been throwing out thus far. 

Fri, 02/05/2010 - 14:49 | 219340 Anonymous
Anonymous's picture

I have a sense that Gold could reach down into the high 8's just to beat the piss out of some of the weak holders before hard core buying should resume.

Fri, 02/05/2010 - 14:53 | 219349 Anonymous
Anonymous's picture

How do you know it's not hedge ?

Fri, 02/05/2010 - 14:56 | 219352 Anonymous
Anonymous's picture

Here's how I call it.
Dow at 6660 by Jan 1st, 2011.
Dollar at 93.
Gold at $925 and rising.
Jobless at 14% by new, %29 by old (depression era measures).

Inflation becoming a serious problem.

-MobBarley

Fri, 02/05/2010 - 14:59 | 219358 RoastingBankers
RoastingBankers's picture

buy the dips

 

lmfao

lmfao

 

get roasted too

Fri, 02/05/2010 - 15:05 | 219369 Anonymous
Anonymous's picture

Those UUP March calls were closed....

Fri, 02/05/2010 - 15:09 | 219377 What a mess_man
What a mess_man's picture

It's beginning to look a lot like.....Prechter!

Fri, 02/05/2010 - 15:26 | 219417 Anonymous
Anonymous's picture

Is this the mother of all carry trades unwinding as Roubini predicted...?

Fri, 02/05/2010 - 15:32 | 219435 Anonymous
Anonymous's picture

Look at the Eur/Dxy and ow it matches the SPX. I looked at the 2-2:30 PM interval and they match. Do we realy need the VIX?

Fri, 02/05/2010 - 15:36 | 219442 geminiRX
geminiRX's picture

I was beginning to think my Mar 23 calls were going to expire worthless. I bought them in December and I thought I would tally up another loss at trying to short this market

Fri, 02/05/2010 - 15:45 | 219475 THE DORK OF CORK
THE DORK OF CORK's picture

As a euro buyer of gold last year averaging 700 euros a ounce I ain't selling any of my philharmonics but I am worried about my silver maple leafs as I think Industrial production will fall off a second cliff this year.

Waiting for Platinum to crash to near $1000 but I have no idea where it will be in euros or heaven forbid in punts !

Fri, 02/05/2010 - 15:52 | 219493 godfader
godfader's picture

What ever happened to the dollar haters???

Fri, 02/05/2010 - 16:32 | 219568 omi
omi's picture

Time to buy EUR

Fri, 02/05/2010 - 16:34 | 219578 Anonymous
Anonymous's picture

Way back when...

Pump Gold, Dump Gold, Buy Dollar

Fri, 02/05/2010 - 16:38 | 219600 CharlesBronson
CharlesBronson's picture

From way back when...for those that can remember...

Pump Gold, Dump Gold, Buy Dollar...

Now, begin to sell the dollar and get ready, not yet, to go long small caps..

Fri, 02/05/2010 - 20:09 | 219967 spekulatn
spekulatn's picture

Well done CharlesB. 

Sat, 02/06/2010 - 07:12 | 220301 Grand Supercycle
Grand Supercycle's picture

USD rally continues, as forecast several months ago.
USD weekly chart is now bullish.
Vice versa for EURO.

The DOW/SP500 downtrend commenced as forecast and the USD rally I forecast several months ago is just getting going.
The recent equities counter trend rally has finished and the March 2009 bear market rally is over. The dollar, crude oil and copper charts have been giving bearish warnings for stocks for months. My indicators can identify trend changes before they occur.They warned me of an impending market crash back in early *2007* The uptrend since March 2009 has been a bear market rally contained within a much larger bear cycle that started in 2000.

http://www.zerohedge.com/forum/market-outlook-0

Do NOT follow this link or you will be banned from the site!