Long-term bullish play in Japan fund

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A long-term bullish trade topped yesterday's option activity in the iShares MSCI Japan Fund even as it fell again.

A trader bought 5,000 January 2015 10 calls for $1.08 and sold 10,000 January 2015 8 puts for $0.48, according to optionMONSTER systems. The volume was well above the previous open interest at each strike, indicating new positioning.

This combination trade, also a ratio spread because of the differing number of contracts, was using the sale of the puts mostly to offset the cost of the long calls . The trader spent only $0.12 to open the position, which is the amount at risk if the EWJ remains above $8. If the stock is below that price, the trader faces assignment the obligation to buy 1 million shares. (See our Education section)

The EWJ finished the day at $9.77, down 0.86 percent but off its session low of $9.72. The exchange-traded fund ended the first day of the year at $9.99, its highest close since gapping down from above $10 at the start of April.

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