A bullish trade in options on a Chinese ETF before a surprise rate cut has raised concerns a trader was acting on inside information.
One investor made the trade in the options market one day before China’s central bank lowered interest rates for the first time since 2008, reports Steven M. Sears at Barron’s.
On Thursday, China lowered the benchmark rate on loans and deposits by 25 basis points. [Rate Cut Stokes China ETFs]
“The news surprised many investors, but one was supremely well positioned to benefit from the rate decision. This investor traded 40,000 options on the iShares China FTSE China 25 (NYSEArca: FXI),” Sears wrote.
FXI was up about 2% in U.S. afternoon trading Thursday.