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Russia ETF draws meme stock-like trading frenzy

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A trader works on the trading floor on the last day of trading before Christmas at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., December 23, 2021. REUTERS/Andrew Kelly

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NEW YORK, March 2 (Reuters) – The battered shares of Van Eck’s Russia ETF (RSX.Z) are attracting a surge of interest from traders and drawing comparisons to last year’s frenzy in so-called meme stocks.

Designed to track the performance of the MVIS Russia Index (.MVRSXTR), the ETF has tumbled 65% over the last two weeks as Russia’s invasion of Ukraine and Western sanctions stir massive gyrations in assets linked to the country.

Its sharp decline has ramped up trading in the ETF’s shares and options, much of it driven by retail investors, analysts said.

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With the ETF’s price swinging wildly — it fell as much as 15% before recovering to trade up as high as 6% on the day — trading volume in the ETF shares jumped to 27 million by 2:30 p.m. (1930 GMT), or about twice the average daily amount, according to Trade Alert data.

Options on the ETF were even busier, with 211,000 contracts traded, or four times the expected volume.

Garrett DeSimone, head quant at OptionMetrics, said some of the volume seemed spurred by traders trying to profit from the extremely elevated volatility in the stock.

“These high levels of volatility are extraordinary, causing the VanEck Russia ETF to behave similarly to a meme stock,” he said.

“It looks as though retail definitely has its fingerprints on RSX options trades today,” DeSimone said.

Sentiment was mixed, with some traders betting on a quick rebound while others were hoping for a continued slump in the shares, based on the choice of options contracts traded.

Russian markets being closed for the third straight day posed another challenge to valuing the ETF correctly, causing the trading price to stray far from its net asset value (NAV) – or the value of each share of the ETF based on its portion of the fund’s underlying assets, analysts said.

On Monday, the ETF’s shares finished the day at a 178% premium to its NAV, according to VanEck data.

“That makes the trading in the shares that much more speculative,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.

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Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.


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