Tuesday, March 15, 2011

Options in Play: Cameco Corporation and iShares MSCI Japan Index (CCJ; EWJ)

From Schaeffer's Research:
As news out of Japan continues to direct the market, traders have turned their attention to uranium producer Cameco Corporation (CCJ) and the iShares MSCI Japan Index (EWJ), which tracks the Japanese equities market. Last-minute put players are placing their bets on CCJ, while EWJ was the subject of a bullishly biased spread strategy.
CCJ price chartPut volume has surged to nine times the norm on CCJ, with roughly 24,000 contracts crossing the tape so far. The most active put is CCJ's March 30 strike, which is slated to expire at the end of this week. This narrowly out-of-the-money option has seen nearly 2,500 contracts change hands -- 52% at the ask price, suggesting they were purchased. The March 30 put currently carries open interest of just 2,080 contracts, so it's safe to assume that eleventh-hour bearish bets are being added.
CCJ is down roughly 3% at last check, deepening Monday's drastic sell-off. The stock is currently attempting to regain a foothold above its 200-day moving average, which hasn't been breached on a daily closing basis since Sept. 23....MORE
From Barron's Focus on Funds blog:

Options On Japan ETF Reach Furious Pace As Traders Worry Crisis Could Spread To China
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....MORE