Emerging marks have struggled for the last year, and nerves remain on edge.
optionMONSTER's Depth Charge monitoring program detected a surge of put volume in the iShares MSCI Emerging Markets Index, a popular fund that tracks the sector. Roughly 50,500 September 46 contracts were sold for $4.27 and an equal number of September 41s were bought for $1.04.
Less than one minute later, 58,000 contracts each traded in the December 40 puts for $2.35 and the December 34 puts for $1.01. The activity was below open interest in both September contracts, but not December, which suggests that an existing bearish put spread was closed and rolled forward by three months.
That would have resulted in a credit of $1.89, and will let them earn an additional $6 if EEM closes at or below $34 on December expiration. The fund, which rose 0.14 percent to $41.89 yesterday, hasn't traded that low since July 2009.
After about a year of outperforming U.S. stocks in 2009 and 2010, the sector has struggled more recently as investors worry about inflation and tight money in emerging-market countries such as China. The fund is only up 3 percent in the last year, while the S&P 500 has rallied 14 percent over that same period.
Yesterday's put trades accounted for the four largest block trades in the options market. They pushed total options volume in the fund to about twice the average level, and were probably the work of a large investor looking to hedge exposure to the sector.
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