Strategic good news spreads to US stocks! Options traders are betting on the rise of Chinese concept stock ETFs
After the People's Bank of China announced a large-scale economic stimulus package, options traders increased their bets on the recovery of the Chinese stock market, leading to a significant rise in related ETFs in the US stock market. The trading volume of call options for iShares China Large-Cap ETF reached the highest level this year, with investors holding an optimistic view on future gains. Stocks such as Pinduoduo and Alibaba performed strongly, while investors also actively bought call options for emerging market funds
According to VESYNC Finance APP, after the announcement of a large-scale economic stimulus package by the People's Bank of China, options traders have increased their bets on the recovery of the Chinese stock market.
On Tuesday, Asian stock markets surged after the People's Bank of China and other financial officials announced measures to boost the real estate industry and the overall economy. These gains spread to the US stock market, with exchange-traded funds (ETFs) tracking Chinese large-cap stocks and internet stocks rising by over 8%. Pinduoduo (PDD.US) surged over 11%, while Alibaba (BABA.US) rose nearly 8%.
In the options market, the trading volume of call options for the $4.3 billion iShares China Large-Cap ETF (FXI.US) soared to the highest level since February this year. The premium for a one-month call contract betting on a 10% rise rather than a 10% drop surged to the highest level since 2015, after trading at a significant discount in early August. In the largest trade of the day, an investor spent $6.75 million to purchase options that would allow them to buy 15 million shares at $33 per share before mid-November, betting on at least a further 12% increase.
Investors flock to Chinese stock ETFs
Investors also heavily bought call options for the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR.US) and Pinduoduo ADR. Buying interest also spread to a broader range of emerging market funds. The trading volume of call options for the iShares MSCI Emerging Markets ETF (EEM.US) surged to over four times the normal level, with investors mainly buying call options expiring in December with a strike price of $50, about 11% higher than the current price