Downside spread targets China fund


The iShares FTSE China 25 Index Fund is coming off the high end of its range, and a large option trade is looking for it to break support.

The FXI is down 0.48 percent to $34.57 in midday trade, adding to yesterday's losses. On Friday the exchange-traded fund tested resistance around $35.50, which has proven to be the high end of its range since the start of May. Support at $32 has been tested several times since then, most recently at the start of the month.

A trader bought 20,000 October $33.50 puts for $0.49 and sold 40,000 October $30.50 puts for the bid price of $0.09, according to optionMONSTER's Depth Charge system. Open interest at each strike was fewer than 7,000 contracts, so this is a new ratio spread .

The put vertical cost the trader $0.31, which is at risk if the stock stays above that $33.50 level. The maximum profit would come with the shares at or below the lower strike. (See our Education section)

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