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Price Forecast:

Bullish Case: The recent implied volatility spikes suggest heightened market anticipation for price movement, potentially driven by positive economic indicators or corporate earnings. If sentiment turns decisively bullish, we could see a significant uptick in EWU's value as volatility normalizes.

Bearish Case: A flat price trend amidst high put activity indicates market uncertainty and potential bearish sentiment. If economic data disappoints or geopolitical tensions escalate, a significant downturn could follow, sharply impacting EWU's price trajectory.

Potential Outcomes:

1. (50%) Price increases if economic indicators improve;

2. (30%) Sideways movement due to mixed signals;

3. (20%) Price declines due to negative market sentiment and geopolitical risks.

Trading Oracle: Adopt a bullish debit spread using near-term dated call options (e.g., EWU 36/37) to capitalize on the recent volatility spike. This strategy leverages the high implied volatility for potential profit. Consider certain hedges with puts as protection against downside risks.

September 10, 2024