Bearish play in emerging markets

Chris McKhann (chris.mckhann@optionmonster.com)
May 10, 2013

A huge put strategy led yesterday's option activity in the iShares Emerging Markets Fund.

A trader bought 94,043 July 42 puts for their ask price of $0.66 and sold the same number of the July 40.50 puts for the bid price of $0.38. The lower-strike puts were sold in volume below open interest of 196,633, so that could have been an opening or closing trade.

The trader could be rolling a put position from the lower to the higher strike, but it seems more likely that this is a new vertical spread . In the latter case, the trader would be spending just $0.28 with the possibility of making $1.22 if the EEM is below $40.50 at expiration in mid-July. (See our Education section)

The EEM gave up 0.72 percent to $43.91, a day after posting its highest close since Feb. 1. Shares were just above that $40.50 level just three weeks ago.

More than 300,000 EEM options changed hands in the session, well above the daily average for the last month. Puts outpaced calls by more than 6 to 1. 

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