Options Trading News

March 27, 2014  Thu 9:48 AM CT


Emerging markets have been coming to life, and the bulls are sticking with the sector again today.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 10,000 December 42 calls in the iShares Emerging Markets Fund for $1.80. They also sold 10,000 December 34 puts for $1.25 and 15,000 of December 46 calls for $0.64. Volume exceeded previous open interest at all three strikes was more than the, so this was a new opening position.

The trader received a credit on the trade and accepts the risk of being forced to sell 500,000 shares if EEM goes above $46. He or she is also on the hook to buy 1 million shares below $34. The maximum gain comes at $46 level. (See our Education section.) Given the unusual risk/reward, it was probably done against an existing position in the fund.

EEM rose 1.25 percent to $40.40 in morning trading, and is up 5 percent in the last week. It's now at its highest price since Jan. 22, and bounced off support at $38 last week.

Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »