CNBC Stock Blog

Trader Strategy: Buy Bounce in 'Ultra' Financial ETF


This blog post was written by OptionMonster's Chris McKhann.

Options traders are making large bets in highly leveraged financial plays.

The ProShares Ultra Financials exchange traded fund (ticker:UYG) aims to produce twice the daily returns of the Dow Jones Financial Index — but instead, the ETF has plummeted from over $40 a year ago because of its high leverage. UYG, which was still as high as $25 as recently as September, fell another 4.4 percent Monday to close at $3.04.

Hoping that the ETF is finding a base at this $3 level, options traders are looking for a bounce and buying the March 3 calls, where more than 32,000 contracts changed hands yesterday.

Most of those contracts were traded in the last few minutes before Monday's close for $0.55 against open interest of 8,884, according to OptionMonster's proprietary tracking systems, which identify unusual options activity. Calls outnumbered puts by nearly 10 to 1, and total options volume was more than 30 percent higher than the 20-day average.

Compare With Other Top Financial ETFs:

UltraShort Financials ProShares

Ultra S&P500 ProShares

iShares Russell 1000 Growth Index

iShares S&P 500 Index


Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of .