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Unusual Options Activity

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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