Trader bets Brazil fund will hold firm
Chris McKhann | firstname.lastname@example.org
A trader sold 17,700 June 56 puts for the bid price of $2.51 yesterday, according to optionMONSTER systems. That volume was more than 3 times the open interest at the start of the session, clearly showing that this is a new position.
The put selling is a bet that the EWZ will remain above $56 through expiration in mid-June. The trader collects the $2.51 risk premium in exchange for the potential of having to buy shares if they are below the strike price. (See our Education section)
The EWZ, which tested support at $51 in November, fell 1.1 percent to $56.57 yesterday. The exchange-traded fund has been in a tight range so far this year, with a 10-day historical volatility below 10 percent. The implied volatility of those puts is 20 percent.
More than 44,000 EWZ options changed hands yesterday, compared to a daily average of 33,000.