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February 6, 2013  Wed 9:52 AM CT

EFA: SEE CHART GET CHAIN FIND STRATEGIES
Heavy option volume in the iShares MSCI EAFE Index Fund today is led by what seems to be a large hedging strategy.

A trader bought 129,550 April 57 puts for the ask price of $1.08 and sold the same number of the December 68 calls for the bid price of $0.36, according to optionMONSTER systems. Open interest at each strike was fewer than 8,000 contracts at the start of the session, so this is clearly a new position.

This combination trade is very likely a type of collar to protect long stock, using the sale of the longer-term calls to help offset some of the cost of the puts. It is still bullish if it is done against shares of the EFA, but only up to the $57 strike price. (See our Education section)

The EFA is down 0.4 percent to $58.42 after hitting a 52-week high of $59.59 last week. The exchanage-traded fund, which tracks stocks in Europe, Asia, and Australia, has been trending higher from support at $47 in early June.

More than 260,000 EFA options have traded overall so far, compared to a daily average of 45,000 over the last month.
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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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