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Unusual Options Activity

Yesterday 20,039 EEM September 41.5 calls were bought at the ask for $0.37 and 51,558 EEM Nov. 36 puts were bought at the ask for $0.35. VXEEM, the CBOE Emerging Markets ETF Volatility Index traded down near its 52-week low, and this trade was a bet that volatility is bottoming out and will increase. EEM closed yesterday at 41.68, so the call strike is much closer to the money than the puts. This suggests the trader is also bullish on emerging markets but is protecting himself should there be a strong reversal and a break of support in the 37 area.

Yesterday we also saw a lot of call buying in the financial sector as traders made bets banks would rally into November expiration due to Fed easing. On trader bought 38,671 BAC November 10 calls for $0.26. Bank of America’s 52-week high is 10.10, and this trade is a bet that the bank trades higher than that in the coming months. We also saw a trader sell 44,211 XLF Oct. 17 calls and buy 40,000 XLF Nov. 17 calls for a net debit of $0.09. This appears to be a trader rolling his long call position forward to profit from a rally into November. Yesterday XLF broke out to a new 52-week high, and this is a bet it goes at least as high as 17.09 by November.

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