GO
Loading...

Emerging Markets Out of Favor No More, Options Say

Alex Williamson | Ikon Images | Getty Images

Do options traders see an Emerging Markets comeback?

Despite today's selloff, recent options activity suggests the answer is yes.

On Wednesday, investors piled into the April 50/52 call spreads on heavy volume in the the iShares MSCI Emerging Markets Index ETF — a trade that doesn't pay off unless the EEM rallies 15% between now and April. The May 49-strike calls also saw heavy activity Wednesday.

"This trading goes against the grain of recent protective trading we have noted in the EEM," Chris Jacobson, Susquehanna Financial Group Chief Options Strategist noted.

The trades defy a recent trend that's pushed emerging markets out of favor. A rapid succession of rate hikes in the BRIC and other emerging countries has spooked investors. Add to the mix Egypt's uprising, which has set off a rash of similar protests in the Mid-East, and investment flows have seen a steady shift out of E.M. and into developed markets.

Still, despite the uncertainty, some investors see potential for a rebound.

"People are trying to buy the rebound, but buying these stocks gets costly," said Dennis Davitt, Head of Equity Trading at First New York. "The less expensive way is to buy a call spread."

Watch Options Actionon CNBC at its new time beginning March 11 - Fridays at 5:00pm ET and then again on Saturdays at 6a ET and on Sundays at 6a ET

Questions, comments send them to us at: optionsaction@cnbc.com

Symbol
Price
 
Change
%Change
EEM
---

Contact

  • Showtimes

    Fridays, 5:30p ET
    Saturday, 6a ET
    Sunday, 6a ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Latest Video

Options Action Daily Reports

Sponsored Related Links

More on thinkorswim by TD Ameritrade

  • Make sure you’re always keeping up with the market with up-to-the-minute news and breaking stories. Move on possible breakout stocks and options with potential opportunity. Plus, get in-depth analysis on futures and forex in one seamless, integrated experience. Join TD Ameritrade and trade commission-free for 60 days + get up to $600 cash.

You Make the Call

  • Mike Khouw, Options Action trader, shares his view on News Corp stock on the heels of testimony from Rupert Murdoch before British Parliament.

  • Do you have a question for the Options Action team? Options Action selects a viewer's question and gives the answer on the show's Make The Call Web Extra video.