The iShares China Xinhua 25 Fund (FXI) is seeing action on straddle sales. The fund, which holds Petrochina (PTR), China Mobile (CHL) and 23 other companies, is trading down 45 cents to $43.30 a share. The fund hit a low of $42.66 this morning after shares in Shanghai fell 5 percent. The sell off in Shanghai was inspired by data that showed wholesale inflation jumping 10 percent in July, and the fastest pace since 1996. Yet, while trading was volatile Monday, some players in the options market seem to be betting that volatility in China’s equity markets will subside between now and Septmember. Earlier today, blocks of FXI September 43 puts and calls traded bidside. A total of 5,400 of those calls and 4,500 puts have now traded. At 11:30 Eastern, 1,443 of the calls traded for $2.30 and 1,443 of the puts for $2.40. With the fund trading at exactly $43.00 a share, the action has all of the signs of straddle selling. If so, it is a bet that the FXI will stay in a range (between $38.30 and $47.7) between now and September options expiration (39 days).
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.