PowerShares DB US Dollar Bullish ETF (UUP) is a fund that follows the price and yield performance of the Deutsche Bank Long US Dollar Futures Index. The index is made strictly of long futures contracts, which attempt to replicate being long the US Dollar against six of the world’s major currencies; the Euro, British Pound, Canadian Dollar, Swedish Krona, Japanese Yen, and Swiss Franc. The fund opened at $26.30 this morning and has seen a slight price decline throughout the A.M. period of $.06 (.25%). UUP has traded in a relatively tight range over the past 52 weeks, staying between $21.14 and $26.50 with the ETF in a decidedly bullish trend since July of last year and hitting the 52- week high this past week.
Despite the extremely bullish price action in the US dollar there are traders who are putting on very large bearish bets in UUP ahead of the Fed meeting and announcement today. This trader may believe that the Fed announcement will send the dollar lower or they may just believe it is overbought. Yesterday a trader bought 250,000 UUP Jun 25 puts for $0.12 as a single block order. This is a $3 million bet on downside in the UUP through Jun expiration. The timing of this bet is important to note as markets are expecting the Fed to signal today when a raise in rates may be coming. Whether this is a speculative bet or a hedge this order is worth note. UUP is trading slightly lower this morning but at the money implied volatility in the name is touching new 52 week highs. This signals that traders may be expecting some wild moves in the UUP post Fed announcement.
Trade: A trader bought 250,000 UUP Jun 25 puts for $0.12
Risk: $12 per 1 lot
Breakeven: $24.88