Huge play targets limited EEM gains

optionMONSTER

A huge trade is counting on limited upside in the iShares Emerging Markets Fund.

optionMONSTER systems show that a trader bought 57,000 August 40.50 calls for the ask price of $0.19 and sold the same number of August 39 calls for $0.52 yesterday. The volume was more than twice the previous open interest at each strike, indicating that this is new positioning.

This strategy is known as a credit spread and takes in $0.33, which the trader will keep as profit if the EEM remains below $39 at expiration in mid-August. The maximum potential loss is $1.17 if it is above $40.50 at that time. (See our Education section)

The EEM was up fractionally yesterday to close at $37.39. The exchange-traded fund was above $44 in early May but fell to $36.16 two weeks ago, its lowest intraday price since November 2011.

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