EWQ Options Reveal Lingering Skepticism Ahead of French Election

Put players continue to target iShares MSCI France ETF ahead of the run-off round in France's presidential election

May 3, 2017 at 2:41 PM
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The second round of the French presidential election will be held this Sunday, with centrist candidate Emmanuel Macron and his far-right opponent Marine Le Pen slated to hold a televised debate later today. The results of the initial round of voting in late April sparked a global relief rally in stocks, as the growing fear surrounding the event was unwound. There still seems to be plenty of skepticism surrounding the final result, too, based on the recent options activity in the iShares MSCI France ETF (EWQ) -- an exchange-traded fund that tracks mid- and large-cap stocks in France.

Specifically, over the past 10 trading sessions, options traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.18 puts for each call. What's more, EWQ's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) is docked at a top-heavy 1.65, meaning near-the-money puts almost double calls among options expiring in three months or less. Plus, put open interest on EWQ hit a 52-week peak of 7,401 contracts on Monday, and is currently docked just below here at 7,334.

Drilling down, more than three-fifths of EWQ's put open interest is found at the May and June 25 strikes, the ETF's top two open interest positions. Data from the major exchanges confirms a healthy amount of buy-to-open activity at each put, meaning options traders expect EWQ to breach $25 over the next several weeks. However, some of the put buying at these out-of-the-money strikes could be protective in nature, given the shares' impressive run since their post-Brexit lows last June.

Specifically, EWQ has surged almost 35% since its June 27 low at $21, and hit a two-year peak of $28.39 just yesterday. Meanwhile, the $25 level holds significance on EWQ's charts, and could serve as a foothold on any election-related pullbacks. In fact, not only does the $25 level represent a 20% return from the ETF's post-Brexit lows, but it is home to the shares' early 2017 highs and the rising 140-day moving average.

ewq daily price chart may 3


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