The iShares China Large-Cap ETF (FXI) could be a good bet for investors bullish on Beijing, according to Michael Khouw of Optimize Advisors. “I think this is sort of a risk-mitigated way to make a bullish bet if you’re inclined to go that way,” he said Tuesday on CNBC’s “Fast Money.” U.S. investors have grown wary of Chinese-listed holdings, particularly after Beijing’s regulatory crackdown on its tech giants. Indeed, U.S. based active money managers have sat on the sidelines when it comes to Chinese stocks, even as names like Baidu and Alibaba jump to begin 2023. Despite concerns related to China, Khouw said a trader purchased 6,000 June 30/35 call spreads on the ETF at $1.04 on Tuesday. It’s a bullish bet by that investor and suggests he or she sees upside upward of 6% for FXI in the next few months. The fund ended Tuesday’s session down 0.44%, closing at $29.27. A call option gives the buyer the right but not the obligation to buy a security at a specified price and by a set date. The purchaser of the call makes money when the asset rises in price. A call spread strategy is a bet that an asset’s price will rise within a specified range: An investor uses two call options, one with a lower strike price and one with a higher strike price, to create that range. Khouw said there’s about a four-to-one payoff if FXI rises about 19.5% by June expiration. The ETF has gained 3.4% this year, meaning it has underperformed the broader S & P 500 ‘s 6.8% gain. It underperformed in 2022 with a loss of 22.6% compared with the broad index’s 19.4% drop. FXI .SPX YTD mountain The FXI compared with the S & P 500
This China ETF is a bullish bet with mitigated risk, options trader says
