DOG (Short Dow 30) is trading 53.84 up 1.8%. <img src="http://3.bp.blogspot.com/_hMry1m7UF10/S_wQI4aRX4I/AAAAAAAACkw/SoOzNcIXsa0/s1600/dog_summary.gif"> The ETF has traded over 6,300 options on total daily average option volume of just 625. All but 244 contracts have been calls for a 25:1 call : put ratio. The largest trades have been the front month 52 and 53 calls. The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/05/dog.html">in the article</a>). The Options Tab (<a href="http://livevol.blogspot.com/2010/05/dog.html">in the article</a>) illustrates that open interest in both the 52 and 53 calls is about as large as the trade volume. By digging into the Level II details, I found that on 5-19-2010 (i.e. last Wednesday) the OI in the calls started to jump. Not surprising, it's long open interest. The OI in these two lines as of tomorrow will be very large relative to any other lines. The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/05/dog.html">in the article</a>) illustrates clearly the vol of those two lines relative to the rest of the chain. Notice how the skew chart looks like an inverted (mirror) image of a normal skew. This makes sense since calls in this are in fact puts in the Dow, so we see higher vol on the upside than the downside. Also notice that the calls purchased are ATM, this makes them cheaper vol (again see the skew chart). i.e. Replace some vega risk with delta risk. Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/05/dog.html">in the article</a>), just the stock chart this time. You can see the rip upside recently. Bets are building on a lower market, though this bets stays away from the expensive "wings" vol. This is trade analysis, not a recommendation. What do you think? Details, trades, prices, vols, skews, charts here: http://livevol.blogspot.com/2010/05/dog.html
This is not the time to start buying DOG, if anything risk should have been placed on this ETF well above dow 10,500, not under 10,000. Why jump it in it after the fact the dow is down over a 1000 points in a few weeks. Can it still go higher, sure it can but most of the quick reward might be in it for now. Can the DOW drop below 9000 and even 8000 yes it sure can but I think a bounce is due in the short term back to at least 10200+ area, however instead of DOG buy into DXD under $25.50.
I guess the Dow only seems low if it bounces... we'll see... DXD off a bounce sounds interesting, levered short.
I guess the Dow only seems low if it bounces... we'll see... DXD off a bounce sounds interesting, levered short.