Downside trade in obscure copper ETN
David Russell | email@example.com
optionMONSTER's Depth Charge tracking program detected the purchase of 1,000 July 43 puts on the iPath Dow Jones UBS Copper exchange-traded note for $2.80. Equal-sized blocks were sold in the July 45 calls for $0.80 and the July 38 puts for $0.50. There was no open interest in any of those contracts before the trade appeared, so it is a new position.
The investor paid $1.50 and will earn a maximum profit of 233 percent if the JJC closes at or below $38 on expiration. The trader will be forced to sell the stock for $45 if it goes above that level, so the options are probably being used to protect a long position.
The JCC fell 0.59 percent to $42.82 yesterday and has lost 13 percent of its value in the last month. A slowing global economy has weakened demand for copper and worsened sentiment toward the metal, which is often used as a proxy for construction and capital expenditures.
The JJC bounced near $38 last October, so yesterday's option trader may be worried about a test of that low. The strategy combined elements of a collar trade with a vertical put spread. (See our Education section)
Overall option volume in the note was 67 times greater than average in the session.