Bullish-Looking China Options Trades Mask Lack of Conviction
- Lower hedging demand has helped drag put-call ratio below one
- Policy support needed to trigger durable gains in gauge: BNP
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China options data that look increasingly optimistic may actually be a sign that investors lack conviction in the market’s ability to stage a sustainable rally.
The Hang Seng China Enterprises Index’s open interest put-to-call ratio - which measures how many bearish options are outstanding relative to bullish ones - has fallen below one. On the surface, that says investors prefer contracts betting on gains. But it could also just show that, after years of decline in the index, investors are throwing in the towel.