EEM Emerging Market 2022 Rebalancing

What’s up Valhalla, EEM is the emerging markets ETF, the emerging markets have not done very well this year with a strong US dollar. The EEM ETF is down about 5 percent on the year currently. Mostly comprised of Chinese and Asian companies, you can see the full ETF holdings below.

With 2022 rapidly approaching, portfolio rebalancing will happen in the 1st Quarter of the new year. With that being said money managers and institutions want to get into equity’s and positions that have the biggest potential for gains for the new year, not into equity’s that have already had massive runs and percentage gains this past year.

Every year the EEM sees massive inflows in January and has peaked in January and February for the last few years, if you take a look at the yearly chart and 5 year chart, you can see the spikes in January and February.

What caught my eye was the massive institutional block trades being bought for deep OTM strikes on the EEM option chain, just like the prior year January run up

Institutions are buying these deep otm strikes expecting another large inflow into the emerging markets come 2022

I’ve been following this option chain for the past few weeks and the OI is massive. These are not retail traders Buying these contracts, these are large institutional buyers aka “Smart Money” placing huge bets on these EEM contracts.

I played this exact same setup last year, and ended up paper handing what would have been a 10x if I had held thru the red.

My current position is playing the January 21st Primary monthly expiration, which is important because institutions typically only trade the primary monthly expiration and not the weeklys.

If you take a look at the OI on the options chain, for the Jan, 21 primary, it is pretty loaded up.

My current position is most heavy in the 54 strike options. Which have an OI of close to 112k

My position has already been up 200 percent, and I have not sold any yet, as I’m expecting a massive inflow come the new year. These options are dirt cheap and they have the potential to be a 5-10 bagger. They are currently only .03 cents, I got a few hundred more contracts filled on Friday for 3.00 each

Again like any far otm options play, know the risk and only put in what you can afford to lose.

These strikes are very far deep otm currently, but These contracts don’t need to be anywhere near the strike price to make money, and provide a fat return.

Keep it on the watchlist and do your own DD but figured I would share my position and thoughts with the community! Not financial advise and invest at your own risk! Cheers! :beers:

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As someone holding a lot of these shares and is down, I hope you are right.

Thanks for bringing attention to this play. I’ll dig in a bit further today. Much appreciated!

The spread on those options… guh!

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Here’s a Barron’s article discussing how great the emerging markets will be in 2022 which goes to further show the rebalancing into emerging markets would make sense at beginning of the year… also I may go boomer and hold some EEM long

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EEM has $0.04 for $53c and has been climbing. Got in this AM

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EEM continues to rise toward the 1/21 opex. Could see this explode with TSM growth. Thanks again for the call out

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With the current market conditions, the EEM ended up selling off along with the rest of the market. The Emerging Market ETF saw over a Billion Dollars in inflows these past two weeks. The Setup was there and The EEM ran from 48.23 to 50.85 almost a 6 percent gain in a matter of a few trading days and the OTM options chain saw a spike which lasted about two days. I was able to cover my cost Basis and exited the trade with a 2x and I am still currently holding far OTM options for Lottos that expire Friday. I covered my cost and expect them to go to zero. Was a risky gamble but ended up being profitable. I Wanted to share my trade with the community. Cheers!

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