Wednesday, July 8, 2009

Options Available for New S&P 500 Triple ETFs

Though they are less than two weeks old, the two new triple ETFs based on the S&P 500 index already have options available to trade. The bullish 3x ETF, Ultra ProShares (UPRO) has July options that expire one week from Friday with strikes from 60 to 95, including single dollar increments from 80 through 90. The bearish -3x Short ProShares (SPXU) has options available from 70 to 95, with all the strikes in single dollar increments.

In anticipation of a broad range of applications and the potential for some significant movement, the strikes for the December options range all the way from 30 to 140 for UPRO and from 40 to 150 for SPXU.

While both of these triple ETFs have been attracting more volume each day, neither has managed to break the million share mark yet. I anticipate that we will begin to see million share days in each of these ETFs next week and shortly thereafter, UPRO and SPXU will begin to trade in the volumes currently associated with leveraged ETF pairs such as FAS/FAZ and SSO/SDS.

As these triple ETFs are based on the same underlying as the VIX, an entire new genus of trading strategies is being hatched as I write this…


Mark Wolfinger said...

Have you taken a peek at the bid/ask spreads in these options?

It's as if they are deliberately sending option traders away. I don't know how the exchanges allow this to happen.

When I was on the floor we had strict rules and the spreads were narrow.

I toyed with the idea of selling OTM call spreads in both on the theory that they will both be trading much lower.

Bill Luby said...

I had a similar strategy thought and a similar reaction to the spreads. These options are brand new, however, and even the underlying is less than two weeks old. I suspect that once the volume ramps up in UPRO and SPXU that the spreads will tighten up in the options, just as they did with FAS/FAZ and TNA/TZA.

Frankly, I have trouble seeing how these products can be anything other than a blockbuster...



Eric said...

I guess this is true of FAS/FAZ. Both are down considerably YTD 85%/70%. I would be curious of the case for buying ATM Put LEAPS on both.

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2023 Bill Luby. All rights reserved.
Web Analytics