Options Trading News

November 20, 2012  Tue 10:38 AM CT

The iShares FTSE China 25 Fund is giving up some of yesterday's gains, but a huge trade sees a floor beneath the shares in the long term.

optionMONSTER's systems show that a trader sold 25,000 January 2014 32 puts for the bid price of $2.54. The previous open interest was 1,664 contracts, so this is a new position.

The FXI is down 1.48 percent to $36.01 today. Earlier this month the exchange-traded fund had bumped up against resistance at $38 that has been in place since its March highs. Shares were down at support around $32 at the start of September.

Today's put selling is a bet that the FXI will hold above $32 through the expiration in more than a year. It is also a bet that the implied volatility of those puts, now at 30 percent, is too high. The current 30-day historical volatility of the stock is 20 percent and has been above 30 percent only briefly this year, in early July.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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