Options On Japan ETF Reach Furious Pace As Traders Worry China

ppteam

The aftershock of earthquakes and safety concerns surrounding nuclear facilities in Japan led traders Monday to buy and sell options on the most popular ETF tracking the market at a furious pace.

Options on the iShares MSCI Japan ETF (EWJ) traded at 27 times its typical pace, according to Dow Jones Newswires’ Brendan Conway.

The ETF dropped 7% on the day and the implied volatility on its options surged some 70%, data from Livevol showed.

The activity indicates that concern is growing that a slowdown in Japan’s economy will dampen growth across Asia.

“(The belief is that) if the Japanese consumer is hurt, it could hurt China, it could spread out,” Jonathan Bensimon, the head of equities and derivatives trading in New York for Societe Generale (SCGLY), said in the report.

Some of the largest trades targeted March $9 puts to sell the ETF. Those deals would make money if EWJ continues to lose ground this week. (March options expire on Friday.)

Nuclear-related stocks also saw a big uptick in options activity, notes Conway. Those included Cameco (CCJ), Shaw Group (SHAW) and USEC (USU).