The iShares MSCI EAFE Index Fund is matching its highest levels in the last six months, but a huge put spread dominates its option activity today.
The EFA, which covers Europe, Asia, and Australia, is up 0.77 percent on the day to $55.24. The exchange-traded fund has climbed from support at $48 in the last two months and matches its two closes from late October, the highest since it gapped down in August.
More than 240,000 EFA options have traded already today, greater than 5 times its daily average. Almost all of this action is in one put spread .
More than 100,000 each of the May 52 and 43 puts have traded against previous open interest of fewer than 2,000 at each strike. Two big blocks of 81,202 went for $1.38 and $0.26 respectively.
The trader is buying the put spread for a net debit of $1.12, which is the most that can be lost if the EFA remains above $52. But if the EFA sells off and is below $43, a level last seen in April of 2009, the trade can make $7.88. This could be hedging against long shares against just such a pullback, but the total position cost is $11 million. (See our Education section)
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