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December 4, 2012  Tue 2:45 AM CT

EWY: SEE CHART GET CHAIN FIND STRATEGIES
The iShares MSCI South Korea Fund has been bumping up against resistance, but yesterday's option activity was dominated by a downside trade.

A trader bought 6,000 December 54 puts for the ask price of $0.09, according to optionMONSTER's Depth Charge system. The previous open interest at the strike was just 81 contracts, so this is clearly a new position.

The EWY was barely higher at the end of the day, closing at $59.65. The exchange-traded fund rose above $60 during the session, its highest level since early October and at resistance going back to its 52-week high of $61.57 on April 4. Shares were down at support at $56 two weeks ago.

Yesterday's long puts were not tied to any stock trades identified by our systems, so they could be an outright bearish play looking for the EWY to drop to prices last seen in July. This could also be hedging against a long position established at an earlier time. (See our Education section)
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Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

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