China fund faces downside strategy
Chris McKhann | [email protected]
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.