Leveraged strategy in Taiwan fund

Taiwan stocks have been stepping up, and the bulls are stepping in.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 20,000 December 14 calls in the iShares MSCI Taiwan ETF for $0.55 yesterday. An equal number of December 13 puts was sold at the same time for $0.36, resulting in a net cost of $0.19. Volume was more than 10 times the previous open interest in each strike, indicating that new positions were initiated.

Owning calls locks in where shares can be purchased in the EWT, and selling puts generates income while obligating the investor to buy them at a loss in the event of a decline. Combining the two strategies is very bullish, resulting in a trade that's highly leveraged to movements in the underlying price. (See our Education section)

The EWT began yesterday's session up 6.5 percent in the last week and ended the day up 0.65 percent at $13.96. That made it the second-best performer of 19 country funds tracked by our researchLAB market scanner, behind the iShares MSCI South Korea (:EWY). Accelerating growth in China has driven the gains in Asian markets.

Total option volume in the exchange-traded fund was 38 times greater than average in the session, according to the Heat Seeker.


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