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Street One Financial LLC (S1F or Street One) is an independent entity affiliated with GWM Group Inc., a full service registered broker dealer and a member of FINRA/SIPC. Street One specializes in educating, evaluating and trading ETFs, equities and options. Our firm assists portfolio managers in... More
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  • “October Call Buyers in UUP Make Tidy Profits Going Into Holiday Shopping Season” 0 comments
    Dec 2, 2010 11:31 PM | about stocks: UUP, WMT, DLTR, COST, TGT, RTH, PMR, FXD, XRT
    On 10/18/10 we published a note to our clients in our Seeking Alpha instablog (http://seekingalpha.com/instablog/336795-street-one-financial/102241-uup-and-gld-like-looking-in-a-mirror) titled “UUP and GLD, Like Looking In A Mirror”, which reflected on the tremendous surge in trading interest in UUP (PowerShares U.S. Dollar Index Bullish). The activity swelled once more over subsequent trading sessions following the original mention, causing us to publish a piece in Minyanville titled “Retail Companies, ETFs To Watch If Dollar Appreciation Continues,” (http://www.minyanville.com/businessmarkets/articles/gold-dollar-us-dollar-physical-gold/10/28/2010/id/30827). During this timeframe, UUP traded in the $22 range, and actually temporarily dipped below $22, while institutional investors scooped up hundreds of thousands of upside call options across various months (December,  January, and March primarily), and trading volume in the underlying ETF surged to unprecedented heights for the product. Since this last mention of UUP on 10/28, the ETF has rallied as much as 4%,, trading at a recent multi-month high of $23.52 before settling back in a bit in the past two trading sessions. In short order, it appears that the call buyers were directionally correct in UUP, and in a big way, as one can see from the chart below that the trend in the ETF (and the U.S. Dollar) has been nothing but up since the dip below $22 in October.

    Chart for UUP: http://stockcharts.com/c-sc/sc?chart=UUP,uu[h,a]daclyyay[pb50!b200!f][vc60][iue12,26,9!lc20]

    We also pointed out the potential rising fortunes of a handful of Retail related equities and ETFs that would potentially benefit in an appreciating U.S. dollar scenario including WMT, DLTR, COST, TGT, RTH, PMR, FXD, and XRT to name a few. COST and TGT have performed exceptionally strongly, with COST closing at its highest levels since 2008 recently and TGT impressing even more so and closing at levels not seen since 2007. Retail ETFs such as PMR (PowerShares Dynamic Retail), XRT (SPDR Retail) and RTH (Retail HOLDR) are either trading at new 52 week highs or flirting with new highs on the strength that has rippled through many Retail related equities, which in many cases is likely attributable to the rising U.S. Dollar scenario along with a number of other fundamental factors. To put it in context, since 10/28, the S&P 500 is up approximately 3% with RTH returning 5% and PMR surging nearly 9% during that same timeframe. So it seems for now that the appreciation in the U.S. Dollar is providing a nice headwind for many individual equity names across the Retail sector.

    While options activity, in particular the surge in call buying has calmed down considerably in UUP, the ETF has consistently traded a multiple of its average daily volume on a daily basis rather regularly throughout the month of November, indicating that perhaps the bullish U.S. Dollar trade has some legs and may be attracting a new crowd of speculators and/or investors at this juncture. 



    Disclosure: No positions
    Stocks: UUP, WMT, DLTR, COST, TGT, RTH, PMR, FXD, XRT
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