Market News

August 1, 2012  Wed 10:41 AM CT

Put buying dominates option trading in the iShares FTSE China 25 Index Fund at its highest level in six weeks, but it could be hedging.

The FXI is up 0.7 percent to $34.45. The exchange-traded fund hasn't been higher for more than a day since mid-May, and shares were down at support and 2012 lows around $32 in late June and mid-July.

Most of the option volume in the name today is in one print in the August 34 puts. A trader bought 21,005 of those contracts for the ask price of $0.58 with volume higher than open interest at the start of the session, so this is a new position.

It is possible that the put buying is an outright bearish play. However, given the market dynamics and potential stimulus measures in China and elsewhere around the world, it seems more likely that this is hedging against a long position. (See our Education section)
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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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