The iShares MSCI Japan ETF (NYSEArca: EWJ), the largest Japan-related exchange traded fund, is off nearly 4% over the past two weeks, but some traders are betting that EWJ is primed to bounce back although Japanese equities have struggled after the Bank of Japan unveiled negative interest rates in response to the volatile global markets that has added to its ongoing deflationary risks, bolstering Japan country-specific exchange traded funds and pulling the rug from under the yen currency.

The BOJ’s aggressive policy was a response to the increasingly weak global economic outlook and falling oil prices, which have renewed deflationary risks.

The central bank previously stated it would target ETFs that track the JPX-Nikkei 400 Index. The JPX-Nikkei 400 Index was launched in January 2014 as a means of revitalizing the Japanese equity market. The JPX-Nikkei 400 Index employs a rigorous screening process based on return on equity, cumulative operating profit and market capitalization to  select high-quality, capital-efficient Japanese companies.

Some options traders see EWJ as positioned to rebound as traders look to buy the dip in Japanese stocks and the related ETFs.

“optionMONSTER’s Heat Seeker monitoring system detected the purchase of 30,000 June 12 calls for $0.22 and the sale of 30,000 June 10 puts for $0.28 today. Volume was well above the open interest in both strikes, showing that these are new positions,” according to optionMONSTER.

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