China fund attracts heavy put selling

Huge put sales topped option trading in the iShares FTSE China 25 Fund yesterday.

First a trader sold 10,000 January 2014 34 puts for the bid price of $1.41 in volume that was well above the strike's previous open interest of 3,075 contracts. A little over an hour later, 50,000 March 39.50 puts were sold for $0.58 against open interest of 2,256, according to optionMONSTER systems.

The put sellers are betting that the exchange-traded fund will remain above their respective strike prices. The traders collect the risk premium in exchange for the potential for having to buy shares if they are below those levels by the January 2014 and March expirations. (See our Education section)

The FXI was unchanged on the day, finishing at $40.63. Thursday's close was just below that from the first day of 2013. Shares have been trending higher from support at $32 in early September.

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