Caution reigns in Japanese stock fund


Japanese stocks are back near their highs, and now traders are hedging their bets.

optionMONSTER's Depth Charge monitoring program detected a bearish combination strategy in the WisdomTree Japan Hedged Equity Fund. More than 14,000 options have traded in so far, twice the daily average of the last month. Most of that resulted from the purchase of 5,500 weekly 49 puts expiring on Aug. 29 for $0.56 and the sale of an equal number of the 50 calls for the exact same price.

The position will profit from a drop below $49 because it involves owning puts. He or she is also effectively short above $50 because, so it's likely they already own the fund. (See our Education section for more on what it means to write calls.)

DXJ fell 0.71 percent to $49.56 in morning trading. It made a 52-week high of $50.95 last week and is up from at $45 in mid-April. The funds biggest holdings include Toyota Motors, Mitsubishi UFJ and Japan Tobacco.

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