Traders previously worried about President Donald Trump taking a firm stance on trade policy with China may also feel at ease after the U.S. President said that he became quick friends with Chinese President Xi Jinping during their meeting last week. Moreover, it is unlikely the U.S. will antagonize trade relations with China as the two work together to handle the bigger problem of North Korea.
“The trader may be trying to take advantage of the drop in options prices on the FXI. A year ago, a common measure of expected future moves for the FXI as determined by options prices (“implied volatility”) was at double what the same measure is at now. This trade may betray an expectation that Chinese volatility is set to rise once again,” according to CNBC.
The $3.1 billion FXI holds 51 stocks, 51.7% of which hail from the financial services sector.
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