Designed to track the performance of the MVIS Russia index, the ETF has fallen 65% in the past two weeks as Russia’s invasion of Ukraine and Western sanctions caused massive swings in assets tied to the country. .
The ETF’s sharp drop has led to an increase in trading in ETF stocks and options, most of which is by retail investors, analysts said.
As the ETF’s price fluctuated wildly (it fell 15% before recovering and rising 6% on the day), the trading volume of ETF shares reached 27 million 2:30 p.m. (1930 GMT), about double the daily average, according to data from Trade Alert.
Options on the ETF were even more active, with 211,000 contracts traded, four times the expected volume.
Garrett DeSimone, head quant at OptionMetrics, said some of the volume appeared to be driven by traders trying to take advantage of the extremely high volatility in the stock.
“These high levels of volatility are extraordinary and make the VanEck Russia ETF behave like a stock itself,” he said.
“It looks like retail has definitely left its mark on RSX options trading today,” DeSimone said.
The picture was mixed, with some traders betting on a quick rally while others hoped for a continued slump in equities based on the choice of options contracts traded.
The closing of the Russian markets for the third consecutive day posed another problem for the correct valuation of the ETF, as the price moved away from its net asset value (NAV), i.e. the value of each ETF share based on its share of the fund’s underlying assets, analysts said.
On Monday, the ETF’s shares ended the day at a 178% premium to its NAV, according to data from VanEck. “It makes stock trading much more speculative,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.