Aside from the insanity in left for dead, highly levered energy, materials and mining related stocks, emerging market equities were the big winners of the recent bounce in oil, stabilization in high yield credit and the range bound action of the dollar.
The emerging market etf, EEM was up nearly 9% on the week, up 18% from its January lows, and now flat on the year, with the chart this week breaking out above the massive downtrend that has been in place since last spring:
Options volume ran hot today, 2.5x average daily volume, with the most active strike the March 33 calls, with 140,000 looking like they were sold to close with an average price of about 37 cents. What’s interesting about this strike is that back on Feb 18th we highlighted the purchase of a large block of this strike:
The emerging market etf, EEM takes the prize for the single largest options trade in the market today. When EEM was trading $30.50, there was a buyer of 215,000 of the March 33 calls, paying 16 cents to open, or paying $3.44 million in premium. These calls break-even at $33.16, up nearly 9% in a little more than a month.
While this is a clearly sizable in premium and contract terms, the options market is placing a fairly low probability that these calls are in the money on March expiration (about 15 delta, implying a 15% chance they are in the money).
I would also add that it the second largest trade on the day was a buy of 100,000 April 35 calls for 21 cents when the etf was $33, or $2.1 million in premium. These calls break-even ar $35.21, up 6.5% on April expiration.
Oh and while we are talking about emerging markets, I’d be remiss not to mention the EWZ, the iShares MSCI Brazil etf that has rallied nearly 25% on the week, up 43%(!) from its January lows, but still down 33% from its 52 week highs made last spring. Interesting that the etf paused today at its 200 day moving average, and at a prior resistance level where the stock failed three times late last year: