Trader Takes $780,000 Call Position in the EWJ

iShares MSCI Japan Index (NYSEARCA:EWJ) is an ETF made up of stocks that are primarily traded on the Tokyo Stock Exchange. EWJ tracks the MSCI Japan, which is an index that measures the performance of the Japanese equity market. The ETF has a relatively low volatility with a beta rating of .74 and a dividend ratio of 1.04%. Share prices of EWJ were trading at $11.90 (as of 10:32AM EDT, and closed the session at $11.97), roughly $0.50 off their 52-week high of $12.43, which the fund hit in late May, and over 3 points higher than their 52-week low of $8.71 from last July. Share prices sold off sharply after reaching their 52-week high but they have slowly climbed back over the past month and look as though they will continue to increase.

With a market cap of $12.21 billion, EWJ is one of the largest ETF’s in Japan. In addition, the ETF is one of the best performing funds this calendar year as Japan’s devaluing of their currency has led to a long rally in the Nikkei 225. The fund is just behind fellow Japanese ETF, DXJ, in performance this year. While EWJ could meet some resistance upon hitting the $12.00 level, it looks to be a good long-term bet, especially if the Yen keeps falling against the dollar and Japanese stocks continue to enjoy their biggest rally in the past two years.

Unusual Option Activity:

We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. Remember that a large number of participants in the equity options market are hedgers.

The “Institutional Trade”:

A trader bought 27,787 EWJ Aug 12 Strike Calls for $.28

Risk: $28 per 1 lot
Reward: Unlimited
Breakeven: $12.28
Cash Outlay: $778,036

Greeks of this Trade:

Delta:      Long
Gamma:  Long
Theta:     Short
Vega:      Long

(Full Disclaimer: I have no position on in this stock)