The SPDR Euro Stoxx 50 ETF (NYSEARCA:FEZ) trades on average 9,427 options per day with 5,356 calls and 4,071 puts, but recently has seen some sizable positioning.
It began on 2/15 with 10,000 May $34 calls sold $1.41 in a spread that bought 30,000 August $37 calls at $0.49. The same structure of this trade took place on 2/22 as 20,000 May $34 calls traded $1.42 and 60,000 August $37 calls at $0.49 to $0.50 in a spread. The same trade took place on 2/27 with 20,000 May $34 calls at $1.65 and 60,000 August $37 calls at $0.58.
These 1X3 diagonal spreads are not common, so some strategist is seeing an opportunity.
Looking closer at the FEZ ETF we see the top weighted holdings are Total SA (NYSE:TOT), Anheuser-Busch (NYSE:BUD), Siemens AG, SAP (NYSE:SAP), Sanofi (NYSE:SNY), Bayer AG, BASF, Unilever (NYSE:UN), Daimler AG, and Allianz with those top 10 holdings accounting for nearly 38%. Financials are most heavily weighted at 18.9%, followed by Industrials at 14%, Consumer Staples at 13%, and Consumer Discretionary at 11.55%. France is weighted 35.8% which is interesting with the upcoming Elections in late April, followed by Germany at 32.85%. In terms of valuation, the ETF has a 3.88% dividend yields with a P/E at 14.4X and Price/Book of 1.5X.
On the chart, FEZ peaked near $45 back in early 2014 and trended down for 3 years, but recently broke out of this downtrend and above its weekly cloud, a trend shift in progress. Weekly RSI has already broken out, nearing its highest level since 2014, and the $34.40 level key to clear a high volume bar with the 38.2% Fibonacci retracement at $35.35 and 50% at $37.30 two near term targets. In terms of a measured move out of this bottoming pattern, I think $39.50 is an appropriate upside target. Based on the options strategy the near-term upside may be minimal and $32.80 is an optimal entry level on weakness to position for strength in the second half of 2017.
Euro Stoxx 50 ETF (FEZ) Chart
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The author does not have a position in mentioned securities at the time of publication. Â Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
