An image of a person holding up a graph
Markets

How volatility seller is playing Peru fund

Volatility is climbing in Peruvian stocks, and one investor wants to take advantage of the situation.

optionMONSTER's tracking systems detected heavy call selling in the iShares MSCI All Peru Capped Index Fund. The EPU's June 44 contracts traded 2,110 times for $1.70 to $1, while the June 45s saw volume of more than 1,500 and premiums of $1.40 to $1.50.

The EPU rallied 6.57 percent to $43.80 yesterday but has been losing value for most of the year as investors worry about the potential election of Ollanta Humala as president this Sunday. Polls indicate that he's in a dead heat with Keiko Fujimori, the daughter of former president Alberto Fujimori.

Heavily supported by the poor, Ollanta has a leftist past and reminds some observers of Venezuela's Hugo Chavez. The country's stock market, one of the best-performing in the world in the last five years, started falling as his popularity increased.

The nervousness has driven up implied volatility in EPU to about 42 percent from around 25 percent in March. Selling calls is a common strategy to respond to that situation, allowing investors earn income from long positions in the underlying fund.

Overall option volume in EPU was 15 times greater than average yesterday.

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.

In This Story

EPU

Other Topics

Options

Latest Markets Videos