To The Moon

After failing to reach 22,000 today, the Hang Seng Index pulled back to 21,814, forming an ugly upper shadow line. At this critical moment, while there's consensus about the pullback in China concept stocks, is this pullback a good entry point? Should those who are already invested consider taking profits?

Examining large options orders for China concept ETFs over the past two days, I conclude that the pullback trend may continue until month-end. For KWEB, the pullback will likely stay above 31.5, with a small chance of going below. FXI may see a larger pullback than KWEB.

Let me briefly explain the differences between these ETFs. KWEB is a Hong Kong tech stock ETF, FXI covers various sectors with tech stocks as the main component, and YINN is a 3x leveraged ETF based on FXI. In terms of liquidity, based on 90-day average option volume: FXI (340,000 contracts) > KWEB (220,000) > ASHR (104,000) > YINN (50,000).

$KraneShares CSI China Internet ETF(KWEB)$

Wednesday, February 13th options opening details show few put openings, mainly calls, including one significant large order.

This large order consists of two calls and one put:

$KWEB 20250228 31.5 PUT$ , volume 30,000 contracts, premium $1.05M

$KWEB 20250228 34.0 CALL$ , volume 30,000 contracts, premium $2.79M

$KWEB 20250228 35.0 CALL$ , volume 30,000 contracts, premium $1.80M

Based on the clustered orders, this appears to be from a major individual trader.

The trading direction seems to be:
Buy $KWEB 20250228 31.5 PUT$ 
Sell $KWEB 20250228 34.0 CALL$ 
Buy $KWEB 20250228 35.0 CALL$ 

Notably, this strategy doesn't lose money on the short side. The sell call premium offsets the two buy premiums. Small loss above 35, only commission loss between 31.5-34, big profit below 31.5.

For these seemingly profitable trades, we've previously discussed how these crafty strategies correspond to trends. It's likely that KWEB's pullback volatility won't be high, and buying puts directly would probably result in losses, which is why the trader doesn't want to pay the $1.05 million needed for buying the 31.5 put.

Looking at the expiration date of these three options: February 28th. This indicates the trader expects the pullback to continue until the end of the month.

Of course, pullbacks in China concept stocks have never been predictable. Whether it will only last until the 28th is uncertain - we can only say this is what this major trader expects.

Institutions' wariness of tech stocks is largely due to DeepSeek. If during the expected pullback there's any announcement about AI optimization or new partnerships, the pullback could end immediately.

floor trades:

Unlike the major trader's expectations, Wall Street remains bullish, with on-exchange block orders mostly being buy strategies. You could say the future outlook is indeed bullish, but the timing for buying isn't ideal, and option time decay is no joke.

Directionless on-exchange block trades, bull spread strategy:

$KWEB 20250321 36.0 CALL$ 

$KWEB 20250321 40.0 CALL$ 

Bullish on-exchange block trade, buying $KWEB 20250417 36.0 CALL$  volume 5,000 contracts, premium $835,000

Bullish on-exchange block trade, buying $KWEB 20250919 39.0 CALL$  volume 10,000 contracts, premium $1.7 million

$iShares China Large-Cap ETF(FXI)$

Compared to KWEB, FXI's pullback forecast is more pessimistic. Since YINN is based on FXI, holders of both should take note.

In late January, institutions predicted FXI would stay below 35, but recent DeepSeek and BYD autonomous driving developments have broken both U.S. and China concept stock valuation filters, leading institutions to increase bullish positions.

FXI shows intense bull-bear competition. Recent 5-day opening details show bullish targets above 35, bearish targets below 31.

Largest bullish option opening in past 5 days: February 10th institutional order $FXI 20250321 35.0 CALL$  45,000 contracts, premium $3.87M.

February 11th: $FXI 20251219 35.0 CALL$  opened, with mid-range trading price and unclear direction. Considering the long-term trend, we tentatively consider it bullish.

February 11th: $FXI 20250321 30.0 PUT$ , opening of 25,000 contracts, primarily buy orders.

$FXI 20250321 31.0 PUT$ , February 11th opened with buy orders of 20,000 contracts, premium $760,000; February 10th bought 26,000 contracts, premium $960,000.

February 11th: $FXI 20250417 33.0 PUT$  opened with buy orders of 7,000 contracts, premium $950,000

February 11th: $FXI 20251219 32.0 PUT$  sell put 15,000 contracts.

FXI has seen strong bearish opening positions this week; the bullish 35 strike large order maintains its direction due to on-exchange trading; overall, the near-term outlook leans bearish.

$X-trackers Harvest CSI 300 China A-Shares Fund(ASHR)$

For ASHR, Wednesday's large order was a covered call: $ASHR 20250417 30.0 CALL$ , volume 30,000 contracts. This is relatively neutral, indicating expected lower volatility.

Regarding Alibaba's potential upside, reference my January 25th butterfly strategy post. This strategy profits above or below 100, with maximum profit at 125, suggesting the stock price is near its ceiling.