How one bull is playing Taiwan fund
Chris McKhann | [email protected]
More than 67,000 EWT options traded yesterday, compared to a daily average of 649. The volume was almost entirely in one combination trade, according to optionMONSTER's tracking systems.
A trader sold 28,188 January 12 puts for $0.21, below the listed bid price, and sold the same number of the 14 calls for the ask price of $0.06. The volume at both strikes was more than open interest.
This bullish position takes in a credit of $0.15, which the trader will keep as profit if the exchange-traded fund is between $12 and $14 at expiration. He or she will face the obligation of buying shares below $12, while the largest profits come with stock above $14.
The EWT finished the day down 1.4 percent at $12.71 but outperformed the broader market, now sitting in the middle of the range both for the last week and the year. The fund tested support at $11.50 a couple of times in June and July but was up at resistance around $13.60 coming into this month.