Options Trading News

June 26, 2013  Wed 4:14 AM CT

A large trader is looking for lower volatility in the iShares China 25 Fund.

optionMONSTER systems show that a block of 20,000 FXI August 31.50 puts traded for $1.43 on a penny-wide spread. The previous open interest was 747 contracts, so this is a new position.

About a minute later, the largest block of FXI stock traded when a print of 940,000 shares was sold for $31.5913. The combination of the stock sale and the short puts creates a delta-neutral play that will profit from lower volatility than that implied by the options. (See our Education section)

The FXI rose 1.93 percent to finish the session at $31.70 after hitting a new 52-week intraday low. Shares were at a 52-week high of $41.97 on the first days of 2013 and were above $38 a month ago. The implied volatility of the FXI options is up to 34 percent, double where it was a month ago.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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