A Bull Bets on Emerging Markets
A large trader is betting that emerging markets are heading higher.
The same player apparently has been buying the iShares MSCI EAFE Index Fund and the iShares MSCI Emerging Markets Index Fund. This trader has been right so far and yesterday came back to the EEM.
OptionMonster’s tracking systems detected the purchase of 40,000 September 42 calls (explain this), the sale of 80,000 September 43.50 calls, and the sale of 40,000 September 45 calls. That trade, known as a butterfly spread, will leverage a move between $42 and $43.50.
It amounts to an $880,000 bet that the EEM will drift up to $43.50 in the next 43 days. If that occurs, the trader will collect $6 million — a profit of more than 500 percent.
The EEM rose 0.42 percent to $40.54 yesterday and is up more than 8 percent since July 25. The butterfly pushed total option volume in the name to almost triple its daily average.
—By CNBC Contributor Jon Najarian
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Jon ‘DRJ’ Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com. Najarian is long EEM.