During President Trump’s visit to Beijing, investors aggressively bet on China-related stocks, driving significant rallies in Alibaba, FXI, and KWEB, largely through bullish call options. Ford Motor also saw a surprise 13% jump due to a China-linked energy storage deal, with its options market heavily favoring upside bets.
As President Donald Trump embarked on crucial discussions with Chinese leader Xi Jinping in Beijing, market optimists seized the moment, placing significant bets on China-linked stocks. This diplomatic exchange spurred some of the most notable rallies in months across Chinese equities, ETFs, and related sectors.
E-commerce behemoth Alibaba saw its shares skyrocket by 8%, despite earlier earnings reports missing analyst expectations. This surge led to a 2.5% rally for the iShares China Large-Cap ETF (FXI).
Options market activity underscored this bullish sentiment for Alibaba, with call options outnumbering puts by roughly five to one. Over 75,000 calls were purchased compared to fewer than 12,000 puts. Out of $160 million in options premium traded by midday, a striking 88% was dedicated to calls, according to data from ThinkOrSwim and SpotGamma.
China-focused exchange-traded funds (ETFs) experienced even more intense trading. The KraneShares China Internet ETF (KWEB) consistently ranked among the top 10 securities by options volume throughout the day. With over 750,000 contracts traded, almost all of the $50 million premium—$48 million—was in calls. Notably, nine out of the top ten trades by dollar amount were call purchases, and the 32-strike call expiring on Friday was the most actively traded contract.
Neil McDonald, CEO of Moomoo, a trading platform popular in Asia, noted a significant uptick in discussions about a potential short squeeze in KWEB and renewed momentum in BABA. "Many retail traders are referring to this as the 'Trump effect' in BABA, reflecting expectations that improving U.S.-China dialogue could act as a catalyst for Chinese tech names that have lagged for months," McDonald stated in an email.
A surprising beneficiary of this China-related theme was Ford Motor, whose shares climbed an impressive 13%. This boost followed a Morgan Stanley analyst's report highlighting the positive potential of Ford's energy-storage licensing agreement with China's Contemporary Amperex Technology (CATL).
Options trading for Ford also showed a strong bullish bias, with call options trading at more than five times the volume of puts, and more than twice as many calls bought as sold. A notable options trade involved a investor buying 7,000 January next year $16.85-strike puts for $245,000, signaling a conviction that the stock could appreciate by over 25% by the expiry date.
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