Puts Dominate Global ETF Action

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 |  About: iShares MSCI EAFE ETF (EFA)
by: optionMONSTER

By Chris McKhann

As the European markets fall sharply into the close, we see option action in one fund with international exposure.
EFA Chart

iShares MSCI EAFE Index (Australasia, and Far East) exchange-traded fund (NYSEARCA:EFA) trades at $47.54. The EFA is down 2.92 percent today, breaking down through support at $48 that had been holding up over the last week. The fund was up at a 52-week high of $58.09 in mid-April.

Not surprisingly it is the puts that dominate today's activity, and one trade at that. One block of 25,000 July 43 puts were bought for $1.09 at more than eight times the previous open interest at that strike, so it was a new opening position.

This put buying is clearly showing concern for the downside but may not be a standalone trade. We do see a single trade of 650,000 of the EFA shares bought. This occurred some 20 minutes after the option trade and may be related.

I say this for two reasons: The main one is that shares of the EFA fell from roughly $48 when the puts were bought to below $47.80 when the stock was supposedly traded. But the stock was bought for just above $48. So this does appear to be a roughly delta-neutral trade, meaning that the strategy is positioned to gain if shares move sharply higher or lower.

Disclosure: No positions