CNBC Stock Blog

Options See Deep Drop for This Asia Fund

David Russell|writer, OptionMonster

The EWT Taiwan exchange-traded fund is pulling back from a 15-month high reached Monday, and now one trader is positioning for a deeper decline.

's real-time tracking systems detected the purchase of 31,000 December 12 puts and the sale of an equal number of December 13 calls. Both priced for $0.20, resulting in neither a credit nor a debit. Volume was about 50 percent above open interest in both strikes.

The EWT (iShares MSCI Taiwan Index) is down 0.63 percent to $12.62 in afternoon trading. The ETF gapped higher on Monday but was unable to break through the $13.20 area that provided support in 2007 and 2008. Some traders may now view that level as resistance.

Today's so-called risk-reversal strategy is designed to leverage a move to the downside. It will earn profits if the EWT falls below $12 and lose money over $13 because of the short position in the calls. It may have been implemented as a hedge by an investor who owns a position in the ETF and is willing to sell it for $13.

The trade pushed overall options volume in the name to seven times greater than average.

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David Russell is a reporter and writer for .