Italian stocks have been weak, and one investor apparently thinks that any rebound will be met with selling.
optionMONSTER's tracking programs detected the sale of 9,000 September 11 calls on the iShares MSCI Italy Index exchange-traded fund yesterday for $0.38. Volume was more than 16 times open interest in the strike.
Writing calls obligates traders to sell shares if they climb to a certain level, which was $11 in the case of yesterday's trade. But including the premium earned, exit price would be $11.38.
That's almost exactly the value where EWI peaked in July after European leaders announced a debt-sharing plan. That move eased near-term worries about financial contagion on the continent, but less government spending is expected to drag on the country's economy.
The EWI slipped 0.19 percent to $10.46 yesterday. It's lost more than 30 percent of its value in the last year and is now attempting to hold its lows from early 2009.
Yesterday's trader probably bought shares in the fund, believing that that they can't go much lower. But he or she expects gains to be limited in the near term, so they sold the calls to reduce the cost basis and volatility . (See our Education section for ways to manage risk through options.)
Total option volume in EWI was 23 times greater than average in the session.
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