Options Trading News

September 19, 2013  Thu 3:16 AM CT

The iShares Brazil Capped Fund attracted large volatility trades yesterday.

A trader bought 20,000 October 50 calls for $0.58 in the morning, followed by another block of 59,790 purchased for $0.58 about an hour later, according to optionMONSTER's tracking systems. These are clearly new positions, as open interest in the strike was 6,333 contracts before the session began.

Corresponding blocks of stock traded with the calls. First 479,520 shares were sold for $47.6667, then a print of 1,434,960 went for $47.5042. These blocks would match the delta of the calls, making the overall trades market-neutral positions looking for higher volatility rather than a specific direction in the stock. (See our Education section)

And that is exactly what they got after the Federal Reserve said it would not alter its accommodative monetary policy in the afternoon.

The EWZ jumped 5.07 percent to close at $49.72 yesterday, shooting higher after the central bank's announcement. The exchange-traded fund dipped below $41 in early July but is now at the highest level since early June.

More than 172,000 EWZ options change hands overall yesterday, triple its daily average in the last month.
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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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