No Fear in China Options as Prices Drop to Two-Year Low

Traders betting on gains in China’s biggest companies are pushing options prices to the most bullish level in almost two years on speculation higher interest rates won’t curb the world’s second-largest economy.

The premium investors pay for puts to sell the iShares FTSE China 25 Index versus calls to buy has tumbled to 15 percent from 31 percent on June 22, according to data on three-month options compiled by Bloomberg, and fell as low as 13 percent this week. That compares with the average of 20 percent since the start of 2005 for the U.S.-traded fund tracking Chinese companies listed in Hong Kong.