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Hong Kong fund draws bearish strategy

Chris McKhann (chris.mckhann@optionmonster.com)

A bearish position topped yesterday's option action in the iShares Hong Kong Fund as it continued to fall.

Total volume in the EWH was 7,885 contracts, compared to a daily average of just 212 in the last month. Almost of the options were in a one trade.

optionMONSTER systems detected the purchase of 3,869 September 17 puts and the sale of the same number of September 21 calls. Both traded for $0.25 in volume that was multiples of the open interest at each strike, clearly indicating that these are new positions.

This combination trade could be a bearish play on the fund, looking for a break below $17 in the next six months, but it is more likely a protective collar on long shares. That would ultimately be bullish up to $21, but the trader would give up any gains beyond that level to protect against a potential pullback.

The EWH has fallen every day this week and was down fractionally yesterday to close at $19.82. Shares were last below $17 in early September. 

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