Chinese stocks have taken a beating, but now the bulls are
looking for a rebound.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 30,000 May 34 calls for $1.05 in the iShares China
Large Cap exchange-traded fund for $1.05. Equal sized-blocks were
sold at the same time in the in the May 31.50 puts and the May
35.50 calls for $0.50 and $0.49 respectively. Volume was more than
triple open interest in all three strikes, indicating that this is
a new three-way spread.
The trade cost just $0.06 and will expand to $1.50 if FXI closes at
$35.50 or higher at expiration two months from now--a profit of
2,400 percent. The investor also stands to lose money if the fund
goes under $31.50 because of the
. (See our
section for more on the leveraging potential and risk of options.)
The FXI rose 1.69 percent to $33.63 yesterday but is down 12
percent since the year began. The stock has been hurt by slowing
industrial production and worries about credit risk on the Chinese
It's noteworthy that puts were written at the $31.50 strike price
because that's near where the fund bottomed last summer and in
mid-2012. The investor apparently views that level as solid
Yesterday's bullish three-way transaction was the largest trade in
the entire session.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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