Dan Nathan Sees Unusual Options Activity In iShares MSCI Emerging Markets Indx (ETF)

On CNBC's Options Action, Dan Nathan spoke about bearish options activity in iShares MSCI Emerging Markets Indx (ETF) EEM. The ETF fell 3.05 percent on Thursday and options traders were betting that there is more room on the downside.

Two thirds of holdings of iShares MSCI Emerging Markets Indx (ETF) are China related, which makes it very vulnerable to the slow down in China.

When the stock was trading at $30.20, a trader sold to close 90,000 contracts of the March 27 puts and he bought 100,000 contracts of the June 25 puts for $0.62. The breakeven for the trade is at $24.38 or approximately 18 percent lower from the closing price on Thursday.

Nathan believes that this is a hedge for the emerging market portfolio, because traders who want to make a bearish bet on iShares MSCI Emerging Markets Indx (ETF) would not choose the June expiration and they wouldn't pick so out of the money option.