Courtesy of WSJ MarketBeat Columnist Matthew Jarzemsky

March 20, 2013

Investors are getting awfully creative in the way they play the volatility surrounding Europe and its crisis.

Amid a renewed flare-up of worries, one investor placed a big bet on European stocks but with a twist; dodging the impact of swings in the euro.

The tiny Europe Hedged Equity exchange-traded fund (HEDJ) stands to multiply in size in the next few days, thanks to a single $102 million trade yesterday.

Tuesday morning, an order hit the tape for 2 million shares of the exchange-traded fund at $50.72. HEDJ tracks a basket of European stocks while using derivatives to offset changes in the price of the euro and prior to Tuesday’s trade had just $46 million in assets.

On Tuesday, an investor who wanted exposure to the strategy likely enlisted a market maker to take the other side of the trade, said Chris Hempstead, director of ETF execution services at WallachBeth Capital LLC, a New York brokerage.

In this case, the market maker would “create” new shares of HEDJ by buying the underlying shares of stock, because the 2-million-share size of the trade sharply exceeded the roughly 900,000 shares of the ETF outstanding at the time.

“Now you’ve got a blockbuster trade, which will almost certainly be followed by creation of 2 million shares,” Hempstead said. “You’ll see assets go from 900,000 shares to nearly 3 million shares in one blink.”

For the entire WSJ MarketBeat report, please click here