EWZ – iShares MSCI Brazil Index ETF – Shares of the EWZ, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of publicly traded securities in the aggregate in the Brazilian market as measured by the MSCI Brazil Index, are up 1.05% to $67.52 as of 11:55 am (ET). The fund popped up on our ‘most active by options volume’ market scanner after one options strategist booked profits on a previously established put position. It looks like the investor may have originally purchased 20,000 puts at the June $73 strike for approximately $2.99 per contract on April 9, 2010, when shares of the ETF were trading at a volume-weighted average price of $75.29. Today the trader sold the now deep in-the-money puts for a premium of $5.95 per contract to pocket approximately $2.96 per contract in net profits. The put player, who is probably utilizing the puts to hedge a long position in the underlying shares, next purchased 40,000 put options at the lower July $66 strike for a premium of $2.56 per contract. The new position yields downside protection should shares of the EWZ decline 6% from the current price of $67.52 to breach the effective breakeven point to the downside at $63.44 by July expiration.
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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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