In a reversal of last week’s pessimistic options positioning, traders are now betting that Russia exchange traded funds will turn around after touching multi-year lows earlier this week.
The Market Vectors Russia ETF (NYSEArca: RSX) fell 5.8% Wednesday but is still up 19.4% from its Tuesday low of $12.5, the lowest price since March 2009. Nevertheless, RSX is down 45.2% year-to-date.
Options on RSX were actively Traded Thursday, with contract volume at 68,000, with calls, which are used to make bullish bets, outnumbering puts by two to one, reports Saqib Iqbal Ahmed for Reuters. The call-to-put ratio Thursday was the highest since December 8.
“Option traders are positioning for continued rebound in Russian stocks as global asset prices rise,” Andrew Wilkinson, chief market analyst at U.S. electronic broker Interactive Brokers LLC, said in the Reuters article.
Specifically, among the most popular trades on Thursday, traders were placing call bets that RSX shares would hit $19 by mid-January 2016 and other calls shooting for share prices of $20 by May 15. RSX ended Thursday at $14.92 per share.
In contrast, options traders were extremely bearish on RSX just a week prior, betting on prices to fall as low as $12 per share as oil prices weigh on the Russian economy. [Options Traders Bet on Bigger Declines for Russia ETF]
Additionally, Wilkinson believes investors are also positioning for lower volatility in the coming months. The 30-day implied volatility on RSX jumped to a multi-year high of 76.43% Tuesday but was down to 71.48% Thursday.
Russian equities have been strengthening off the Tuesday low on a rebound in oil prices. Additionally, some are jumping on Russia markets for their cheap valuations. For instance, RSX shows a price-to-earnings ratio of 6.8 and a price-to-book of 0.9%. In contrast, the S&P 500 index has a 17.1 P/E and a 2.4 P/B. [Tom Lydon Talks Opportunity With Russia ETFs on CNBC]
Market Vectors Russia ETF
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Max Chen contributed to this article.