Why trader is selling puts in China ETF

Chris McKhann (chris.mckhann@optionmonster.com)
January 25, 2013

The iShares China 25 Index Fund has been pulling back this week, but one trader is betting that further downside will be limited.
 
optionMONSTER systems show that a trader sold 9,000 August 36 puts for the bid price of $0.99. The volume was far above the strike's open interest of 1,546 contracts at the beginning of the day, clearly indicating that this is a new position.

The FXI is down 1.5 percent to $40.90 this morning. The exchange-traded fund was near $42 earlier in the week, almost matching its intraday high from the start of the year. Shares were at support at the $36 level in mid-November and down near $32 at the start of September.

Today's put seller is betting that the FXI will hold above that $36 through expiration in mid-August. The trader is also taking the risk of having to buy the shares if they are below that strike price. (See our Education section)

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