Options Trading News

January 14, 2014  Tue 4:31 AM CT

A large trader is combining stock and options in looking for a big move higher or lower in the iShares Japan Fund.

optionMONSTER's Depth Charge system detected the purchase of 15,000 February 12 puts for the ask price of $0.22 yesterday. The volume far eclipsed the strike's previous open interest of 3,526 contracts, clearly indicating that this is a new position.  

Less than a minute later, the largest block of EWJ shares traded with 705,000 bought for $12.0413. Combined with the puts, this creates an overall delta-neutral position that would profit from a sharp move in either direction and/or for volatility to be higher than that implied by the options. (See our Education section)

The EWJ finished the day at $12 even, down fractionally on the session. The exchange-traded fund is in the middle of an increasingly tight range.

Its 20-day historical volatility is down to 13.6 percent, near the lowest levels of the last year. The implied volatility of those puts was just above that.
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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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