Bulls are betting big on this global ETF that's deep in a bear market
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- KWEB (KraneShares CSI China Internet ETF) is down more than 40% from its October record amid concerns over AI valuations and trade war flare-ups, yet saw options volume nearly triple the 30-day average on Tuesday.
- KWEB options traders exchanged 628,000 contracts with 612,000 being calls; over 250,000 were likely buyer-initiated versus fewer than 4,000 put purchases, and $46 million of the $48 million in premium traded was tied to calls.
- KWEB rallied almost 4% over three days after China reported manufacturing activity returning to growth and its highest services PMI since May; a bounce in the FXI (iShares China Large-Cap) faded.
- The most active KWEB contract was the $29-strike call expiring Dec. 18, which requires a 23% rally from current levels just to break even — among the top 20 contracts traded, 17 were calls.
- The single largest KWEB trade was a buyer of roughly 102,000 of those $29-strike calls — an $11 million position — offset by selling $930,000 of $35-strike December calls and $770,000 of $33-strike September calls, per SpotGamma data.
- Nike shares dropped in after-hours trading Tuesday despite an earnings beat, with the company citing worries about the resilience of the Chinese consumer — reinforcing the bearish backdrop options traders are betting against.
Why it matters: A trader just committed $11 million to KWEB calls that need a 23% rally by December to break even — a massive, low-probability contrarian wager against a 40% drawdown and amid fresh signals (Nike's Chinese consumer warning, trade war fears) that the bearish case still has legs. If Chinese stocks do bounce on the improving manufacturing PMI, these call buyers capture outsized upside; if not, nearly $46 million in call premium expires worthless.
