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• Protection is key to Hong Kong trade
• Update: Top unusual option activity
• Bear bites into Hong Kong stocks

• EWH 0% Rate It

Hong Kong shares have been moving sideways for a year, and one bull is looking for a summertime rally.

optionMONSTER's Heat Seeker tracking system detected the purchase of 25,000 August 15 calls on the iShares MSCI Hong Kong Index exchange-traded fund for $0.58 and the sale of an equal number of August 15 puts for $0.42. The trade cost a net $0.16 to implement and pushed total options volume in the fund to 12 times greater than average.

The EWH fell 0.53 percent to $15.11 in morning trading and is down 9 percent in the last three months. The stock rolled over in mid-April and then made a lower high in June.

However it seems to be holding its ground above $14.50 and refused to make a subsequent lower low this month, which may suggest it's getting ready to move higher rather than sell off.

Today's option trade, known as a bullish risk reversal or synthetic long, is designed to profit from a rally. It will let the investor double his or her money for every $0.16 that EWH trades over $15.16, and lose money below $15.

(Chart courtesy of tradeMONSTER)

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