Downside play on emerging markets

The iShares MSCI Emerging Markets Fund rose in a negative market yesterday, but one institutional trader is looking at potential downside.

The EEM ended the day up 0.17 at $43.83 after hitting a six-month intraday high earlier in the session. The exchange-traded fund is above its 10-day moving average and has been trending higher from support around $27 in the last two months.

optionMONSTER's systems show that a trader sold 15,000 March 40 puts for the bid price of $0.20 against open interest of 86,789, so it could have been a closing transaction. At the same time, he or she bought 15,000 March 41.50 puts for $0.40 at about twice the open interest, so this was a new opening position.

This could be a trader rolling a put position to a higher strike. But if it is a new opening put spread , the trader is looking for the stock to drop back to the $40 level in the coming weeks. (See our Education section)

Interestingly, the CBOE Emerging Markets Fund Volatility Index (VXEEM) was down 5.32 percent yesterday to 26.86. The VXEEM is similar to the VIX and now has futures and options trading on it.

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