Trump Doesn't Scare Bullish Options Traders From EWW

iShares MSCI Mexico Capped ETF (EWW) call optionss are hot among traders, despite escalating political tensions between the U.S. and Mexico

Feb 3, 2017 at 12:40 PM
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Since the U.S. election, and amid escalating political tensions between the U.S. and Mexico, investors have been keeping an eye on iShares MSCI Mexico Capped ETF (EWW) shares. Despite recent reports that President Donald Trump told Mexican President Enrique Pena Nieto he would consider sending U.S. troops to Mexico to stop "bad hombres" -- with Mexican officials denying a threatening tone to the comments -- EWW is in positive territory for the day, and is continuing to recover from its seven-year low of $41.23, touched just last month. Meanwhile, it looks like options traders may be changing their tune on the shares of the Mexican ETF, which typically averages a gain in the month of February.

EWW On the Charts

EWW is up 0.8% at $45.89 so far today. The shares have been making a series of lower highs and lows since 2014, with several rebound attempts stopped by their 80-week moving average. According to Schaeffer's Quantitative Analyst Chris Prybal, EWW has averaged a gain of 0.9% in February, since inception, with March historically being the ETF's top-performing month, averaging a gain of 4.8%. Currently, the shares are up 2.7% month-to-date.

EWW Mexico ETF chart

Options Traders Buy EWW Calls

In the option pits, put volume hit an annual high the day after the U.S. election, on Nov. 9. However, long calls have been gaining popularity in the past two weeks, with EWW's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.31 sitting just 3 percentage points from an annual peak. Near-term traders are now more call-skewed than usual, with iShares MSCI Mexico Capped ETF's (EWW) Schaeffer's put/call open interest ratio (SOIR) of 0.73 in just the 6th percentile of its annual range.

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