scorecard
  1. Home
  2. stock market
  3. news
  4. As investors flee China, options traders pile into longshot bets pegged to rebound hopes

As investors flee China, options traders pile into longshot bets pegged to rebound hopes

Filip De Mott   

As investors flee China, options traders pile into longshot bets pegged to rebound hopes
  • Despite investors retreating from China, call options volumes on Chinese ETFs are surging, Bloomberg reported.
  • Options traders are betting that Beijing stimulus efforts will cause a short burst in market gains.

As China's stock market mayhem pushes foreigners out the door, a different type of trader is stepping up.

The volume of options that target US-listed exchange traded funds that track Chinese markets have swung up, Bloomberg reported. For instance, call option volumes on the iShares China Large-Cap ETF, or FXI, hit their highest in over a year.

It's part of a broader trend appearing throughout the $20 billion China-linked fund market.

The strategy aims to capture any potential rebound the country's stock market may experience, pinned on hopes that Beijing authorities manage to bring back confidence in the country's fiscal situation.

China has massively fallen out of favor among offshore investors and its market value has shed nearly $7 trillion since 2021, which includes Chinese stocks on US-listed indexes. The decline has sparked fears that the exodus of foreign buyers will be long-lasting, first triggered by Beijing's tech crackdown and the country's seismic property crisis.

But these conditions could mean big payouts for options traders if their optimism proves true. Recent stimulus announcements from Beijing have been met by upside swings in the market. For instance, the latest measures implemented by the government pushed the FXI up 4.4% last week, Bloomberg said.

Authorities have enforced a slew of new measures to realign markets, including new restrictions on domestic trading in offshore securities, limits to short-selling, and the sacking of China's securities regulator.

Buying volumes on shorter-term contracts have surged the most, as investors look to take advantage of current low valuations in Chinese equities. This gives traders the chance to bet on further stimulus efforts in the near term, especially with Beijing's National People's Congress scheduled for March, Bloomberg said.


Popular Right Now




Advertisement