Surge in Activity Around a PowerShares ETF Draws the WSJ's Notice
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Thursday, November 05, 2009

Surge in Activity Around a PowerShares ETF Draws the WSJ's Notice

Traders on Wednesday gravitated toward the PowerShares DB US Dollar Index Fund, an ETF which tracks the U.S. dollar, mimicking the performance of the dollar against a group of other currencies, the The Wall Street Journal reported Thursday. The action occurred hours before the Federal Reserve said it would maintain the federal-funds target rate level.

The volume of trades increased to 12 times the normal level, according to the report. Investors grabbed 319,000 calls that allow them to buy the shares and 2,000 puts that allow them to sell, according to Trade Alert.

Most of the attention to the PowerShares fund probably came from professional investors, who bought options in batches of 10,000 or more. Many of the transactions cost $150,000 and up.

The transactions came as a surprise to some options strategists, however, who said that now may not be the best time to bet on the strength of U.S. currency.

"This looks like a contrarian play," Interactive Brokers senior market analyst Andrew Wilkinson told the Journal. "As the global recovery got under way, the use of the dollar as protection against growing risk has diminished."

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