Europe’s finances haven’t completely imploded, and in the last couple of weeks, the euro has gained against the dollar. Some bearish currency traders, however, are betting on leveraged-inverse currency exchange traded funds (ETFs) for any shifts in the fortunes of the euro.
Call buyers were focusing on near-term August call options, along with longer-dated September calls, reports Brendan Conway for The Wall Street Journal. “Call” usually reflects a bullish sentiment, but in this case, the bulls are betting on downward movements in the euro against the dollar by flocking to the ProShares UltraShort Euro (NYSEArca: EUO). [Listen to Our Podcast on Europe ETFs.]
In the last couple of months, the euro has been appreciating as European countries reported stronger economic data. If the situation reverses, the options traders will win out. Recently, the U.K. housing gauge signaled its first drop in prices in a year and France reported weaker industrial production for June. [Why Euro ETFs Are Under the Weather.]
European countries have been reassuring the market with budget proposals but the execution of those proposals is far from practical, remarks Macro Man for iStockAnalyst. European bonds are also being dumped, following European Union’s agreement to rescue more banks and add to a greater budget deficit. The euro to dollar trend is breaking up, and some observers are wondering if this is the start of a new turn. [Trends Spotted in Dollar, Yen and Euro ETFs.]
For more information on the euro, visit our euro category. According to the ETF Analyzer, there are four euro-focused ETFs, so you can play it straight, short or leveraged:
- ProShares UltraShort Euro (NYSEArca: EUO)
- ProShares Ultra Euro (NYSEArca: ULE)
- CurrencyShares Euro Trust (NYSEArca: FXE)
- Wisdomtree Dreyfus Euro ETF (NYSEArca: EU)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.