Learn the trade here. Make it on tradeMONSTER

Options Trading News

October 3, 2012  Wed 3:16 AM CT

EWJ: SEE CHART GET CHAIN FIND STRATEGIES
One investor apparently thinks that paranoia is running high in Japanese stocks and wants to profit from the situation.

optionMONSTER's tracking systems detected the sale of 35,000 December 8 puts in the iShares MSCI Japan exchange-traded fund for $0.06. Volume was more than 4 times the open interest in the strike at the start of the day, indicating new positioning. The trade, which was one of the largest in the market during yesterday's session, followed similar activity one day earlier.

The investor is betting that the EWJ will remain above $8 through late 2012. If that turns out to be right, those puts will become worthless and the trader will keep the $0.06 as profit. If the bet is wrong, he or she could be forced to buy the stock at the strike price and face potentially huge losses.

Option pricing appears to be a major part of the strategy because it is anticipating a bigger move than the EWJ has made in recent months. Implied volatility is around 18 percent, while the fund has fluctuated only about 14 percent. Selling puts is a common way to make money from a perception that premiums are too high. (See our Education section)

The EWJ, which fell 0.44 percent to $9.10 percent yesterday, has been trading in a narrow range since May. The fund hasn't seen $8 in more than three years, which is probably giving the investor confidence that it will stay above that level in coming months.

Overall option volume the fund was quadruple its daily average.
Share this article with your friends


Related Stories

EWJ

Trader sees a floor in Japan fund

October 1, 2014

The iShares Japan Fund is pushing to its lowest level since May, but one trader is betting that further losses will be limited.

EWJ

Japan ETF keeps faith of this bull

September 29, 2014

A short-term trader is rolling a long-call position forward, buying a bit more time for a pop in shares of the iShares Japan Fund.

EWJ

Notable option trades in equities

September 26, 2014

Nearing the halfway mark in today's session, here are the individual equity names with unusual option activity on optionMONSTER's ActionTracker data system.

Premium Services

Free Webinars

Make Money in a Volatile Market

Education & Strategy

Vexed by the VIX

Many people probably don't know that the calculation changed for the CBOE Volatility Index this week, but it's worth discussing...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER