The emerging markets of Brazil and China have led the global stock markets this year, but now options traders are looking for a pullback.
Put volume in the exchange traded fund that tracks China surged to 73,048 contracts, more than twice the average and six times the number of calls. Most of the buying focused on the July 34 strikes, which changed hands 56,206 times against open interest of 5,340 contracts. The July 37 puts also traded more than 5,000 times for $2.25 to $2.55, although volume was below open interest.
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iShares FTSE/Xinhua China 25 Index is down near $37.01 in early afternoon trading, and is up 27 percent this year. The iSharesMSCI Brazil Index, which has risen 49 percent so far in 2009, saw heavy trading in its July 55 and July 50 puts. The EWZ is down 1 percent to below $53.
Some agricultural stocks that often trade closely with emerging markets were also targeted by the bears. Intrepid Potash's June 25 puts traded more than 4,277 contracts, with buyers dominating the action. IPI is down more than 8 percent at below $27.
Potash and Deere also experienced above-average put buying as their share prices fell. Potash is showing some bearish technical signals on its chart as well.
One emerging-market country to see better sentiment was Mexico, where 24,750 June 35 puts were sold for $0.40 against open interest of 43,112 contracts. The trader might have removed downside protection from a long position in the stock, or written the puts to receive premium. The iShares MSCI Mexico Investable Market Index is up slightly to above $35.
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David Russell is a reporter and writer for OptionMonster.