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January 17, 2013  Thu 11:13 AM CT

FXI: SEE CHART GET CHAIN FIND STRATEGIES
The iShares FTSE China 25 Fund has been running higher in recent months, and one large trader is apparently counting on those gains sticking.

A trader sold blocks of 5,500 and 4,500 April 41 puts for the bid price of $1.64, optionMONSTER systems show. That volume is far above the strike's open interest of 1,823 at the start of the day, so it is clearly new positioning.

The put selling is a bet that the FXI will hold at or above current levels, while the trader is also showing the willingness to buy shares if they are below the $41 strike price. In the latter case the effective buying price would be $39.36. (See our Education section)

The FXI is up 0.4 percent this morning to $41.38. The exchange-traded fund bounced off support at $32 in early November and hit a 52-week high of $41.97 on the first trading day of 2013.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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