Trading of bearish emerging-market stock options jumped to a five-month high in the U.S. yesterday as investors boosted buying of the contracts to protect against losses in the shares amid a global equity retreat.
More than 465,000 puts to sell shares of the iShares MSCI Emerging Markets exchange-traded fund changed hands, 3.6 times the four-week average and triple the number of calls to buy. The most-active contracts were December $44 puts, which rose 58 percent and accounted for a quarter of put trades. The ETF tracking 718 stocks in 22 developing nations fell the most in almost a month, losing 2.6 percent to $45.17 as of the close in New York. It hasn’t closed below $44 since Sept. 23.
“People are scrambling for hedges or rolling their protection lower,” said Alec Levine, a strategist at Wallachbeth Capital LLC in New York. “Everyone ran for the exits at the same time. When markets get defensive, emerging markets correct disproportionately.”
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