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China fund attracts large bullish play

Chris McKhann (chris.mckhann@optionmonster.com)

A bullish option play is targeting the iShares China 25 Index Fund.

More than 69,000 FXI options have traded so far today, which already tops its total daily average in the last month. Most of the action is in a January 2014 three-way combination, according to optionMONSTER systems.

A trader sold 15,000 of the 32 puts for $1.08 in volume below the previous open interest of more than 51,000. Six seconds later this investor bought 15,000 of the 42 calls for the ask price of $2.04, and six seconds after that he or she sold 15,000 of the 46 calls for the bid price of $0.90. The volumes at these last two strikes was well above the previous open interest.

It appears that the trader is selling the puts to help offset the cost of a bullish call spread . The overall position costs just $0.06 and provides upside exposure up to $46. (See our Education section)

The FXI is up 0.58 percent to $39.76 this morning. But it has had a bad week, as it was just shy of heavy resistance at $42 on Monday.

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