Yesterday there was unusual options activity in FXI and EWJ.
40,000 FXI Oct. 30.5 puts were sold for $0.09 and separately 20,000 EWJ Jan. 10
calls were bought for $0.13. Selling an FXI put is a neutral to bullish
strategy that profits if the ETF is above 30.41, 13.5% above yesterday’s close,
at October expiration. The EWJ long call is a bullish strategy that profits if
the ETF is above 10.13 at January expiration, a 8% move higher. The bullish
tone of these trades is interesting given the predominately negative tone of
news out of the region. Protests have sprung up across China as the Chinese
rally against the Japanese purchase of an island the Chinese claim as their
own. The protests have become severe enough that Japanese auto manufacturers have
temporarily closed their plants in China. However, these large trades show that
some traders do not expect this to hold back the Chinese and Japanese stock
markets in the coming months and are gaining long exposure now.
Another large option trade yesterday was the purchase of
30,000 IWM Nov. 80 puts for $1.10. This is a bearish trade that profits if IWM
is below 78.90 at November expiration. This is a 9.8% move from yesterday’s
close. IWM made a new all-time high last week and is currently just 1.4% below
that level. The trader buying these calls is likely long small-cap stock and is
seeking protection from a market decline heading into the election.
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