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January 29, 2013  Tue 3:16 AM CT

Some huge combination trades topped yesterday's option activity in the iShares MSCI Emerging Markets Index Fund.

optionMONSTER systems show that 615,000 contracts changed hands in the exchange-traded fund yesterday, giving it the third-largest option volume total in the market. It was also 3 times the EEM's daily average for the last month.

First a trader bought 173,029 April 42.50 puts for the ask price $0.87, then sold 111,429 December 51 calls just seconds later for the bid price of $0.61. The previous open interest at each strike was around 1,000 contracts, so these are new positions.

About an hour later, a trader bought 51,500 March 42 puts for $0.45 and sold the same number of March 47 calls for the bid price of $0.08. Those volumes were less open interest.

All this activity could be the work of one trader, but what really stands out is the gigantic diagonal combination done first. That could be an outright bearish position but is more likely a hedge of some sort against long stock. (See our Education section)

The EEM is finished the day down 0.7 percent to $43.85 as it continued to trend lower since the first session of 2013, when it hit a 52-week high of $45.33. In the longer term it has been trending higher from support at $37 in the last six months. 
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