Call selling hits emerging market ETF
Chris McKhann | email@example.com
The VWO is down more than 2 percent to trade at $39.07, continuing to trade lower from above $44 at the start of April. The exchange-traded fund has been unable to break above $40 for the last two days as it rallied off support at $37 at the start of June. The close on the first day of the month was its lowest since November.
The VWO option volume tops 11,000 contracts, far outstripping its daily average of just 800 contracts. Almost all of the activity was in the September 42 calls, which were sold 10,000 times for $0.73, according to optionMONSTER's systems. The volume was more than 10 times the previous open interest.
This call selling is a bet that the VWO won't be much above $42 by that expiration. The options may have been sold naked in an initial bearish bet, or they could have been traded against long shares in a covered call position, which would be bullish up to the strike price. (See our Education section)
The trade could also have been done against a position in the underlying shares or a similar fund, such as the iShares Emerging Markets Fund (EEM).