The Australian dollar rallied to its highest price in 14 months last week, and one trader apparently exited a trade with profits.
optionMONSTER's tracking systems detected the purchase of 11,000 March 70 puts on the FXA Australian dollar exchange-traded fund for $0.15. The volume closely resembled open interest of 11,053, so the trade probably resulted from an investor buying back puts that had been sold previously to earn premium.
FXA fell 0.23 percent to $90.44 on Friday. The currency has been on a tear as the country's economy rebounds more quickly than expected, but the ETF has run into a point of potential resistance at about $90.50 that dates to late 2007 and early 2008. The trader may also think most of the good news is priced in after positive jobs data was released Thursday.
He or she may have sold the puts for several dollars when the Aussie was lower and volatility was higher. Closing the position now would let them keep most of the original credit without having to risk corrections over the next five months.
The trade would be an example of an investor profitably exiting a short position in volatility. We saw similar transactions opened last week in names such as Hovnanian and Ciena.
Overall options volume was 26 times greater than average in FXA.
