On Sunday, Eurasia Group President Ian Bremmer wrote about the scale of recent events in Ukraine: "As Russia conducts direct military intervention in Ukraine, the US and Europe condemn it, and the Ukrainian army goes on high alert, we're witnessing the most seismic geopolitical events since 9/11." But the options market is not yet convinced of that assessment.
Russian stocks fell 10% in early trading on Monday, but the reaction in the Market vectors Russia ETF (RSX) has been more bullish than we would have expected. Implied volatility in March options climbed above 50%. The last time implied volatility in the ETF was this high was during the worst of the European debt crisis in 2011. In 2008, RSX one-month option premiums climbed briefly as high as 150%. While the jump in option premiums is noteworthy, it would take several days or weeks of trading at these elevated levels of volatility to bring the current situation up to the levels of other crises in the last several years.
After the first hour of trading, RSX shares had risen to just -7% on the day, and volume in RSX options was over 79,000 contracts, nearly 19X the average daily volume in the options on this ETF. The largest orders so far on the day were mostly puts transacted at the bid price, suggesting investors eager to capture some of the inflated option premium. One customer sold the March 21 puts 19,150 times for a price of $0.40.
OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits
Jared can be followed on Twitter at twitter.com/CondorOptions
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Select the service that is right for you!COMPARE ALL SERVICES
Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas