Option Activity In EWJ $11 January 2012 Calls (Japan ETF), NIKKEI/S&P Ratio Update

On Friday (12/10) a trader bought 50,000 $11 $EWJ January 2012 Calls for $0.69 with 18,800 open on the International Securities Exchange (ISE). I first found out about this at Bloomberg.com ("Bullish Japan ETF Options Jump to 2010 High in U.S. Trading on Single Bet"). EWJ closed at $10.58 on Friday. To be profitable, EWJ needs trade above $11.69 before expiration or the calls need an upside implied volatility jolt. See the ISE quote with volatility measures here.

I've been watching the NIKKEI 225 Index and Japanese Yen recently, or mainly the NIKKEI/S&P ratio after it broke above the 50 day moving average. Since then it rallied towards the downtrend line, made a high of 8.557, and sold off. The ratio is back below the 2008 and 2009 lows so there needs to be a confirmed inverted head and shoulders pattern to officially battle that downtrend line. Also, a week ago I saw activity in FXY (Yen ETF) June 2011 Puts. Interesting Japanese market maneuverings going on.

I'm watching the 50DMA and downtrend line on $NIKK:SPX. EWJ looks similar to SPY. Is Japan set to exceed growth expectations in 2011? Read this Guardian article from 12/9/2010: "World's third largest economy grew at an annualised rate of 4.5% last quarter, up from the inital estimate of 3.9%". I charted out EWJ (Japan iShares) and $NIKK:$SPX after the jump.

$NIKK:$SPX (Nikkei:S&P) at StockCharts.com

EWJ (Japan iShares)

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