Options Trading News

June 3, 2013  Mon 12:19 PM CT

Japanese stocks have pulled back since starting the year with a monster rally, but now some bulls are coming back.

optionMONSTER's Heat Seeker monitoring system detected heavy call volume in two exchange-traded funds linked to the country's equity markets. First, they targeted the WisdomTree Japan Hedged Equity Fund (DXJ), buying the July 50 calls for $0.70 and selling the July 55s for $0.15. Some 20,000 traded in both, more than 6 times previous open interest.

They paid $0.55 to open this vertical spread and will collect $5 if the fund closes at or above $55 on expiration. That's a potential gain of 809 percent from a 25 percent move in the underlying index. (See our Education section for more on how to harness the leveraging power of options.)

The DXJ is down 3.62 percent to $44.60 in afternoon trading. It appreciated more than 30 percent between mid-December and mid-May as the Japanese market broke out of a multi-decade slump but has been falling sharply since.

The iShares MSCI Japan Fund, a competing product with the DXJ, grabbed attention less than an hour later. This time buyers kept it simple, snapping up about 11,000 September 12 calls for $0.15 and $0.16. They also bought the Weekly 10.50 calls expiring this Friday for $0.24 to $0.26.

The EWJ is off 2.21 percent to $10.60 and has performed similarly in recent months as the DXJ.

Total option volume is 5 times greater than average in DXJ, with calls outnumbering puts by 12 to 1. The EWJ's activity is only slight above normal amounts.
Share this article with your friends

Related Stories


Traders turn bullish on Japan ETF

September 23, 2015

Call buyers are looking for a rally in the WisdomTree Japan Hedged Equity Fund, which bounced after last month's market plunge but has been range-bound since.

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »