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December 20, 2012  Thu 2:14 AM CT

A bearish strategy led yesterday's option volume in the iShares China 25 Index Fund even as it trades near 52-week highs.

optionMONSTER systems show that the big trade came in the March expiration. A trader bought 10,000 March 37 puts for the ask price of $0.79 and sold 10,000 March 42 calls for the bid price of $0.67. The volume at each strike exceeded the open interest at the start of the session, so this is a new combination spread.

The trade cost $0.12 to open, plus the margin requirements. This could be an outright bearish play or a collar position. The latter would have been done to hedge a long position in FXI shares, protecting against a potential pullback but also limiting the upside through the short calls. (See our Education section)

The FXI was down fractionally yesterday at $39.46. Shares bounced off long term support at $32 in early September, and Tuesday's close was the exchange-traded fund's highest since mid-March.
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