Nasdaq Rally Sets Up Profit Opportunity for Traders Ahead of Massive ETF Options Buyback
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The Nasdaq 100 Covered Call ETF sells call options on the Nasdaq 100 index and will need to buy back those options this week.
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The ETF's short position of $8 billion is now below the current Nasdaq level due to the index's rally since October.
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The ETF buyback offers an opportunity for traders to profit by buying Nasdaq futures ahead of the transaction.
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Strategists calculate the ETF will need to purchase thousands of Nasdaq futures contracts to cover its position expiring this Friday.
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The Nasdaq has historically rallied in the week leading up to when this ETF covers its options, rising 2% on average.