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Insurance policy on Taiwanese stocks

Taiwanese stocks are near a two-year high, and one investor is adjusting a protective strategy.

optionMONSTER's Depth Charge tracking system detected the purchase of 24,150 September 14 puts for $0.35 on the iShares MSCI Taiwan Index (EWT) exchange-traded fund. An equal number of June 13 puts were sold at the same time for $0.04, although volume was below open interest in that strike. That suggests an existing position was rolled from one contract to the other.

The transaction cost a net $0.31 and gives the investor an additional three months of downside exposure. He or she also raised the strike price by $1, reducing the amount of money that would be lost on shares if a drop occurs.

The EWT rose 1.79 percent to $15.96 in morning trading. It rallied hard in the second half of 2010, but since then has been struggling to get through $16. Some chart watchers may now consider that level resistance and expect another drop before it's broken.

The trade pushed overall option volume in EWT to 33 times greater than average, with puts outnumbering calls by more than 1,000 to 1.

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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