India stocks seen holding gains

optionMONSTER

Indian stocks have been rebounding sharply from a long slide, and one trader apparently believes that they will hold current levels through early 2016.

The WisdomTree India Earnings Fund saw 22,775 options trade on Friday, compared to a daily average of 8,298. Most of that action was in the January 2016 16 puts, where 20,000 contracts were sold for the bid price of $2.95. This is clearly a new position because there was no previous open interest at that strike.

The trader is betting that the EPI will be above the $16 strike price at expiration in 843 days, but the position is likely tied to stock as part of a delta-neutral play that is looking for lower volatility . That means that he or she is more interested in the actual volatility of the shares being less than that implied by the option price, regardless of which direction the stock takes. (See our Education section)

The exchange-traded fund was down 2.65 percent to $15.99 on Friday. The EPI rallied off a 52-week low of $12.99 set on Aug. 28 but was up at $16.63 at Thursday's intraday high.


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