With the U.S., Mexico, and Canada slated to resume NAFTA negotiations on Monday, options volume is accelerated on the iShares MSCI Mexico Capped (NYSE:EWW) today. At last check, roughly 13,400 puts and 8,100 calls are on the tape, nearly three times what's typically seen and volume pacing in the 94th annual percentile.
Most active is the June 51 call, due to a 5,000-contract block that Trade-Alert indicates was bought to open for $0.63 apiece -- creating an initial cash outlay of $315,000 (number of contracts * premium paid * 100 shares per contract). This is the most the trader stands to lose, should EWW settle below the strike at the close on Friday, June 15, while breakeven for the call buyer at expiration is $51.63 (strike plus premium paid).
Options traders were already active on the exchange-traded fund (ETF) heading into today's trading, with total open interest of 392,026 contracts at a 12-month peak. Most of the action has been centered in the July series, with the 46 put and 54 and 58 calls home to the fund's top open interest positions of roughly 22,000 contracts each.
According to data from the major options exchanges, it looks the bulk of these positions were initiated back on March 14, with the calls being bought to open and the puts being sold to open. If these are connected, the speculative play sets a short-term floor for EWW at $46, while betting on a breakout above long-term resistance by mid-June.
Looking at the charts, EWW hasn't traded below $46 since February 2017, with the $48-$49 region serving as a base going back to November. However, any rally attempts in 2018 have been halted in the $54-$55 neighborhood -- home to the fund's early October bear gap, and a 61.8% Fibonacci retracement of its plunge from August highs near $58 to mid-November lows at $48. At last check, EWW was trading down 1% at $48.88, pacing for a fifth straight loss.
