Markets

Call buyers bet Japan ETF will bounce

Japanese equities are trying to rebound from a springtime selloff, and now the bulls are ready to charge.

optionMONSTER's Heat Seeker tracking system detected the purchase of 40,000 December 10 calls on the iShares MSCI Japan Index exchange-traded fund for $0.34. The trade was 14 times greater than existing open interest in the contract.

EWJ Chart

EWJ rose 0.89 percent to $9.62 yesterday and is up 5 percent in the last month. While the country's market has lagged the S&P 500 on the rebound, it also posted a smaller drop in May and June than its U.S. counterpart.

The fund popped above its 50-day moving average yesterday for the first time since May 3 (black line on chart), which could have made the call buyers expect a push higher. The fund's largest holdings include Toyota, Mitsubishi UFJ Financial, and Honda.

EWJ needs to climb at least 8 percent by expiration for the calls purchased today to turn a profit.

The trade also came amid signs in the currency market that the yen is falling against both the dollar and the euro. A weaker Japanese currency has typically been a positive factor for country's stock market.

Overall options volume in EWJ was 35 times greater than average yesterday, with calls outnumbering puts by more than 3,400 to 1.

(Chart courtesy of tradeMONSTER)

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.


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

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