Energy Bears Snatch Up Calls and Leverage (ERY)
Shares of the Direxion Daily 3x Energy Inverse ETF (ERY) are trading higher on the session by 0.84%, at $8.43. The ETF, which tracks three times the inverse of the Energy Select Sector Index, has been down-trending over the past three months, losing 44% of its value.
Options traders are betting that the ETF can make back some ground over the next few weeks and are buying upside calls.
The heaviest action is coming on the October $8 call, where over 25,000 calls have traded on open interest of 38,304 contracts. The largest trade was the purchase of 15,599 calls, on the offer, for $1.00.
This marks the second day in a row that the Oct $8 strike has been in play. Yesterday, over 45,000 calls traded on the strike, the vast majority of which were purchases. Prior to yesterday’s action, open interest was only a few thousand contracts.
Today, we are seeing overall call volume running at 6.75x normal volume with 25,517 contracts traded.
Volatility metrics tell a similar story. With implied and historical volatility registering 59% and 41%, respectively, the Oct $8 call traded at 60% vol.
The Direxion Daily 3x Energy Inverse ETF seeks daily investment results before fees and expenses of 300% of the inverse (or opposite) of the performance of the Energy Select Sector Index. It uses a wide variety off assets to achieve it’s desired net short position.
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