To The Moon

Recently, Wall Street's bullish voices on Chinese assets have gradually increased. With the breakthrough progress of DeepSeek causing a sensation in the global market, many investment banks on Wall Street have recently held a more optimistic view on China's stock market.

Liu Jinjin, chief China equity strategist at Goldman Sachs, and his team predict that China's stock market is expected to rise further after the recent strong rise as the birth of DeepSeek triggers people's optimism about China's technological progress. The Goldman Sachs team raised the target of the CSI 300 Index for the next 12 months from 4,600 points to 4,700 points, with an upside of 19%. Goldman Sachs believes that the emergence of DeepSeek R1 and other Chinese artificial intelligence models has changed the narrative of Chinese science and technology; The improved growth outlook and possible confidence boost will increase the fair value of Chinese stocks by 15%-20%, and may bring more than $200 billion in portfolio inflows.

HSBC also upgraded its view on Chinese stocks to high from neutral. Kuang Zheng, chief investment director of HSBC Global Private Banking and Wealth Management China, said that the success of DeepSeek shows China's undervalued ability to achieve major technological innovations. "China's unique drivers of artificial intelligence revaluation, high risk-reward potential, relatively conservative positions held by foreign investors in Chinese stocks, and significant valuation discounts in Chinese stocks all make the Chinese stock market more attractive".

Meng Lei, China equity strategist at UBS Securities, said that DeepSeek has reached the level of similar world-leading large-scale models at a lower cost, bringing Chinese innovation back to the vision of global investors. "We have noticed that it is highly related to the AI theme. Industries such as computers, automobiles, and electronics have experienced significant valuation increases after the Spring Festival. And pushed the proportion of the turnover of the big technology sector to all A shares to a historical high. In the medium term, this theme may show a pulse-like rise as favorable fundamentals continue to be realized and more application scenarios are implemented. "

In view of violent market fluctuations, investors can also consider using option strategies such as bear market call spreads for shorting.

What is a Bear Call Spread Strategy?

A bear call spread is an options strategy in which options traders expect the price of the underlying asset to fall for some time to come, the trader wants to short the underlying and wants to limit trading to a certain risk range.

Specifically, the bear market call spread is achieved by buying a call option at a specific strike price while selling the same number of call options with the same expiration date at a lower strike price.

Specific cases of shorting YINN

Take shorting YINN as an example,$Triple Long FTSE China ETF-Direxion (YINN) $The current price is $44.39. Assuming that investors expect a drop to around $32 on March 28, investors can use the bear market spread strategy to short YINN at this time.

Step 1: Sell the call option with an exercise price of 32 expiring on March 28 and get a premium of $1,430.

Step 2: Buy a call option with the same expiration date and an exercise price of 50, which costs premium $385, and the bear market spread is established.

• Strategy: Bear Call Spread

• SellMarch 28Exercise price32Call options, collect$1430Premium

• BUYMarch 28Exercise price50Call options, payment$385Premium

• Establishment costs(Net premium income):1430-385 = $1045

• Maximum spread: 50-32 = $18 (100 shares per contract, corresponding to $1800)

Profit and loss calculation:

Maximum profit(YINN ≤ 32):

• When the YINN price is below or equal to $32 at the March 28 expiry, neither call option has value and investors retain$1045Net premium.

• Maximum profit = $1045

Maximum loss(YINN ≥ 50):

• When the YINN price is higher than $50, the spread between the two options reaches its maximum (50-32 = $18), and investors need to pay$1800, but has collected $1,045 premium, resulting in a net loss:

• Maximum loss = 1800-1045 = $755

Breakeven Point (BEP)：

• BEP occurs atStrike price of option put + Net premium income/100

• 32 + (1045/100) =$42.45

• If the maturity YINN price is$42.45, investors' profit and loss were flat.

Strategy Summary

• High winning rate: As long as YINN prices remain atUnder $42.45, investors will make a profit.

• Maximum profit $1045, maximum loss $755, the profit-loss ratio is about1.38, risks are controllable.

• Suitable for moderate bearish or volatileThe market does not need YINN to drop sharply to $32, as long as it is less than $42.45 to make a profit.

• Maximum riskFrom YINN exceeded expectations and rose by more than $50.