Hi I’m looking for the most efficient way to gain long-term (LEAPS) exposure to Chinese equity indices, preferably around 10% ITM. I’m aware of FXI, but I find the bid-ask spreads relatively wide most of the time. Additionally, I see a tail risk of sanctions prohibiting the ownership of Chinese securities in the US. As a European investor, I consider it safer to invest directly through Asia (HK or other markets), assuming Europe might not fully align with potential US sanctions. Another advantage is that the implied financing rate in Hong Kong should be ~100bps lower than in the US, which helps given the high leverage of options. I also checked out the Hang Seng, Hang Seng Mini, and Hang Seng Tech indices, but I couldn’t find any ITM options available. The ones that were offered had prohibitive bid-ask spreads (>10%). Am I missing something? I checked about an hour before the HK close (which is early morning in my time zone). Would appreciate insights on the best instruments and execution venues. (I am using IBKR as a broker) Thanks a lot for your help!
I’m concerned about mispricing the options and ending up on the wrong side of the trade. Additionally, since I plan to roll them forward, I could get hit by the wide spreads twice or even struggle to find a buyer. Do you have any other suggestions?
Try the synthetic you will mostly get a much tighter spread than going 10% itm on calls. (long 10% otm put + long future)
you said you didn’t want trade them for those concerns. Now you say you want to learn by trading them. troll thread.
FXI is one of the most liquid ETFs on the planet. The US comment is baseless. You can also trade KWEB / CWEB / YINN.
Well maybe i am just not used to the kind of spreads that are common in the option space. A 4-10% spread seems very prohibitive to me. Thanks for mentioning the other ETFs i will will check out the spreads on monday. I disagree that a tail risk of hard sanctions on china is baseless. It just happened to russia, how can you be 100% sure it will not happen to china? I think it is very unlikely (= tail risk) but far from impossible. The Trade war could turn ugly, there could be a conflict over taiwan if the island decides to declare independence and in general chinas rise is challenging the status of the US as the undisputed superpower. On the other hand the US is very reliant on china for its supply chains, this is what makes it unlikely. Europe on the other hand just cannot afford hard sanctions on Russia AND China, it would cripple its economies. And it has no status as a superpower to defend. So for European Investors i think the safer bet is going through HK or even better Singapore.