Options Traders Embrace China Stock Rally After Stimulus Announcement

Investors are increasingly betting on a recovery in Chinese stocks, purchasing bullish options on US-traded securities following a significant stimulus package from China's central bank.

In the options market, call volumes for the $4.3 billion iShares China Large-Cap ETF (ticker FXI) hit their highest levels since February. The one-month call skew reached its highest premium since 2008. In the day's largest trade, an investor invested $6.75 million in options to buy 15 million shares at $33 by mid-November, anticipating a rally of at least 12%.

This bullish trend extended to other funds, including the Xtrackers Harvest CSI China A-Shares ETF (ticker ASHR) and PDD Holdings ADRs. Additionally, call volumes for the iShares MSCI Emerging Markets ETF surged to over four times their typical levels, with investors buying $50 calls for more than 13 million shares expiring in December, about 11% above the current price.