Markets

What's behind call selling in EEM

Emerging-market stocks have been pushing against a major resistance level, and one investor is using options to profit from the passage of time.

Our tracking programs detected the sale of 11,250 September 53 calls for $0.64 on the iShares MSCI Emerging Markets Index ( EEM ) exchange-traded fund. An equal number of 11,250 September 54 calls were also sold for $0.47, and volume was more than 4 times open interest in both strikes.

A block of 22,500 June 55 calls was purchased at the same time for $0.08 and $0.09, though volume in those contracts was below open interest. The trades probably resulted from an investor rolling a short position in the June calls to the September expiration, letting him or her collect a net payment of about $1.06 million.

The EEM is up 0.35 percent to $45.56 in morning trading and has been pushing against the $48 level for more than three months. That's about the same price area where it traded in June 2008 immediately before it gapped below it 200-day moving average and began a huge push to the downside.

Other stocks have struggled against similar levels on their respective price charts.

Today's seller probably owns about 2 million shares in the fund and has been writing the options as part of a covered call strategy. (See our Education section)

(Chart courtesy of tradeMONSTER)

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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