The bulls have already made money in E-House China, and now they're hedging their bets.
optionMONSTER's Depth Charge monitoring program detected the purchase of about 2,900 October 8 puts for $0.65 and the sale of a matching number of October 11 calls for $1.10. Volume was more than triple open interest at both strikes, which indicates a new strategy was initiated.
Bearish by itself, the resulting position was probably done against a long trade in the shares. Writing the calls generated income to pay for the protective puts. The so-called collar trade also caps their upside at $11.45 and protects them under $8.45. (See our Education section for other hedging techniques .)
EJ rose 5.3 percent to $10.53 yesterday and is up 33 percent in the last month. The Chinese real-estate company had bullish call buying on July 2 and was cited one week later on our Market Action webinar. Other Chinese stocks mentioned on the webinar that have exploded higher include Baidu, Kandi Technologies, and Aluminum Corporation of China.
Total option volume in EJ was 6 times greater than average in the session.
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