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While I’m skeptical of the U.S. market right now, foreign companies — especially in Japan, with the yen down the way it is — are getting more attractive.
Another thing with Japan is that, demographically, it has an aging population, so they are moving more and more to automation and robots. I think that is much more effective for a company in this day and age. Robots are much better than people. So, Japan’s aging population is not all bad, because the reliance on robots will make the companies much more efficient. And with a declining yen, that’s even better.
So, I believe the iShares MSCI Japan ETF (NYSEARCA:EWJ) is probably going to rise in the future, and as such I’m recommending a call debit spread, using the following, longer-dated options:
Using a spread order, buy to open the EWJ Jan. 2018 $53 call and sell to open the EWJ Jan. 2018 $58 call for a net debit of about $1.35.
A debit spread is simply a way to lower the cost of buying options, as the option that you sell to open (short) helps offset the cost of the option that you buy to open. Therefore, this call debit spread is a way to lower the cost of buying bullish call options. Many brokers will require the use of margin and/or a set amount of reserved capital to execute a debit spread; contact your broker directly for specific requirements.
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.