High-flying Taiwan fund draws hedge

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Taiwan stocks have been ripping higher, but now the bears are stepping in.

optionMONSTER's Depth Charge monitoring program detected the purchase of 11,600 August 16 puts in the iShares MSCI Taiwan Fund, whose largest holdings include Taiwan Semiconductor, Hon Hai Precision, and MediaTek. Most of the contracts priced for $0.16. Volume was more than 90 times open interest at the strike, which indicates that new positions were initiated.

Puts lock in the price where the fund can be sold, letting investors hedge against a pullback or speculate on a drop. Given the recent run in the exchange-traded fund, today's activity was probably protective in nature. (See our Education section)

The EWT is down 0.43 percent to $16.23 in afternoon trading but is up 5 percent in the last two weeks. That makes it the best-performing country fund tracked by our researchLAB market scanner during that period. It's also broken out above its early-2011 high of $16.08.

Total option volume is already 44 times greater than average in the EWT so far today, with puts outnumbering calls by a bearish 23-to-1 ratio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.



This article appears in: Investing , Options


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