Early Friday a huge spread trade was executed at CBOE using options on the iShares MSCI Emerging Market Index ETF (EEM).   Just a few minutes into the day a trader bought 66,000 EEM Mar 38 Calls at 0.62, sold 132,000 (twice as many) EEM Mar 39 Calls for 0.18 and then took in a little more premium by selling 66,000 EEM Mar 37 Puts for 0.19.  The net result was a cost of 0.07 for each short 1 37 Put, long 1 38 Call, short 2 39 Calls spreads.  The payoff at expiration on March 17th shows up below.

EEM Payoff

EEM was at 38.12 when this trade was executed and if that’s where it lands at expiration the result will be a small profit.  The best-case scenario is EEM closing at 39.00 two weeks from today with a trade profit of 0.93.  Note on the LiveVol chart below that 39.00 is close to the recent high.  Finally, there is some high risk to this trade if EEM makes a big more to the downside or to the upside losses will continue to mount.

EEM Chart