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Japan bulls refuse to back down

Japanese stocks have been gaining, and the bulls see more gains on the horizon.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 19,755 August 49.38 calls on the WisdomTree Japan Hedged Fund for $1.09. An equal number of August 52.38 calls were sold at the same time for $0.29. Volume was more than triple open interest at both strikes, which indicates that new positions were initiated.

The investor now has a right to buy DXJ stock for $49.38 but must sell it for $52.38 if it climbs above that level--a spread of $3. He or she paid $0.80 to open this bullish call spread and stands to make 275 percent if the fund moves to the higher price. (See our Education section)

DXJ is down 0.22 percent to $48.48 in afternoon trading but is up 4.5 percent in the last month. That's more than twice the performance of the S&P 500 in the same period. We have also seen profitable trades recently in a related exchange-traded fund , the iShares Japan Fund , and researchLAB shows capital moving into Japanese banks.

Japanese equities staged a huge rally between November 2012 and May 2013, followed by a year of sideways movement. They've been showing signs of life recently as the Japanese yen weakens, and now the head of Tokyo's government-pension fund has expressed a desire to increase allocations into domestic equities.

Total option volume in DXJ is 5 times greater than average, according to the Heat Seeker. Calls outnumber puts by a bullish 29-to-1 ratio. The fund's biggest holdings include Canon, Mitsubishi UFJ Financial, and Toyota Motor.

Disclosure: I own TM shares.

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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