The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Wednesday, August 15, 2007
Email – #390
** Take Profits On China
The iShares FTSE/Xinhua China 25 Index (NYSE: FXI), the ETF for the Chinese market, has moved down nicely in the short-term and handed us fat gains while the markets have been tanking.
Unfortunately, the FXI has shown a direct correlation with the S&P 500. This means that if the market rebounds from oversold conditions, which is quite possible, we will see a marked decline in our FXI puts. We WILL re-enter the China play at a more fortuitous time in the future – hopefully when the euphoria is back in the price of the FXI.
Sell your FXI January 2009 $80 put options (VHF MP). The current bid is $4.40 – and because this is a very nervous and slightly illiquid market, use LIMIT orders and be sure that you are out of the position by the end of the day.
Karim
