EFA – iShares EAFE Index ETF – A large-volume bearish put play on the EFA, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the MSCI EAFE Index – an index that includes stocks from Europe, Australasia and the Far East, indicates one big options investor is bracing for continued erosion in the price of the underlying fund through July expiration. Shares of the ETF are currently down 3.30% to stand at $47.36 as of 12:20 pm (ET). It looks like one trader purchased 25,000 puts at the July $43 strike for a premium of $1.09 per contract. The massive size of the put purchase suggests perhaps that the trader responsible is long the stock and securing downside protection in case shares of the EFA do decline significantly by expiration next month. In such a scenario, shares of the fund must fall 11.50% from the current price to breach the effective breakeven point on the puts at $41.91 before downside protection to kicks in. Options implied volatility on the EFA is up 8.4% to 36.33% just before 12:30 pm (ET).
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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