On Monday, options traders displayed a bullish stance on Chinese market exchange-traded funds (ETFs) by engaging in significant upside option positioning, Susquehanna International Group options strategist Alison Edwards pointed out. Notably, activity in the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSE:ASHR) and the KraneShares CSI China Internet ETF (NYSE:KWEB) indicated expectations of a rally in their respective share prices.
For ASHR, two separate opening transactions were reported. Initially, an investor purchased 10,000 July 29 calls, with a delta of 0.36, at a price of $1.14 each. Shortly after, another investor entered the market, buying 11,500 of the same July 29 calls, also with a delta of 0.36, but at a slightly higher price of $1.16, and executed the trade delta neutral. These trades suggest that the investors are anticipating ASHR's shares to climb above $29, which would represent an increase of 11.5% from current levels, by mid-July.
In the case of KWEB, the options market saw the purchase of 25,000 March 33/40 call spreads at a cost of $0.52 per spread, and 8,000 March 32/37 call spreads for $0.61 each. These call spreads are a bullish strategy, where investors buy a call option at a lower strike price and sell another at a higher strike price within the same expiration period. The structure of these trades implies a forecast for KWEB's stock to appreciate, with the price targets set within the range of the call spreads' strike prices.
These sizable options bets come as investors navigate the dynamic landscape of the Chinese market, with ETFs like ASHR and KWEB providing focused exposure to sectors within China's economy. The targeted bullish options strategies employed by investors reflect a specific expectation for growth in these segments, aligning with broader market sentiments on the potential for Chinese equities.
The transactions in both ETFs, ASHR and KWEB, underscore a trend among some investors who are positioning themselves to profit from an anticipated upward movement in Chinese stocks. The use of options strategies like call buying and call spreads allows for significant leverage with a limited downside, should the expected rally materialize by the chosen expiration dates.
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