A container ship is berthed at the container terminal in Qingdao, China’s eastern Shandong province on June 25, 2026.
– | Afp | Getty Images
While U.S. equities continue their ascent—with the Nasdaq marking its strongest quarter since 2020—the sentiment in China remains starkly contrasting.
The iShares China Large-Cap (FXI) has fallen 18% this year, remaining entrenched in a nine-month bear market. Similarly, the KraneShares CSI China Internet ETF (KWEB) has plummeted more than 40% from its October peak, weighed down by trade tensions and volatility in AI valuations.
Recent corporate signals have added to the pessimism; Nike shares dropped in after-hours trading following an earnings report that, despite beating expectations, highlighted concerns regarding the resilience of Chinese consumer spending.
However, options traders are signaling a potential trend reversal.
Chinese equities saw a brief surge late last week following reports that manufacturing activity has returned to growth and the services PMI reached its highest level since May. While the recovery in FXI was short-lived, KWEB has posted a three-day rally of nearly 4%, drawing significant interest from speculators.
According to Cboe LiveVol data, KWEB’s options volume on Tuesday was nearly triple its 30-day average. ThinkOrSwim data reveals that of the 628,000 contracts traded, a staggering 612,000 were calls. More than 250,000 of these were initiated by buyers, dwarfing the fewer than 4,000 put purchases. Out of $48 million in total premiums traded, $46 million was allocated to calls.
This represents an extraordinary level of bullish skew, particularly for a security with such weak trailing price momentum.
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KraneShares CSI China Internet ETF, 1 year
Analysis of the top 20 KWEB contracts traded Tuesday shows 17 were calls. This activity suggests more than just short-term gambling, as only two contracts expired on Thursday. The most active contract by both volume and value was the 29-strike call expiring December 18—a position that requires a 23% rally to break even.
The day’s most significant transaction involved a buyer purchasing nearly 102,000 of those calls in an $11 million trade. According to SpotGamma data, this was partially offset by the sale of $930,000 in 35-strike calls expiring the same day and $770,000 in 33-strike calls expiring September 18.