Someone with deep pockets is worried about a 14% decline in the emerging markets ETF (EEM):
EEM – iShares MSCI Emerging Markets Index – A massive chunk of put options purchased on the emerging markets fund this afternoon flies in the face of the 1.5% rally in shares during the session to $39.20. Approximately 95,000 put options were purchased at the November 35 strike for an average premium of 73 pennies per contract. Perhaps the investor responsible for the trade is long the stock and wary of potential declines in the fund through expiration in November. Downside protection provided by the puts may kick in if shares of the EEM decline 13% from the current level to breach the breakeven point to the downside at $34.27. We note that shares of the emerging markets ETF have remained higher than $34.00 since July 20, 2009.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.