The Chinese market (FXI) is really struggling and I wonder if we are going to see an entry point for put options or long-term call options sometime soon.
Over the past 5 years the Chinese large cap stocks have lost nearly 50% of their value while the S&P500 gained nearly 43%.
FXI 5yr Chart
This year has been a challenging year for most investors around the world and the Chinese stock continued underperforming the US market.
FXI YTD Chart
But from the traders' point of view, none of this really matters unless we can profit from it somehow.
So what could we do?
Unfortunately there is not enough volume in the long-term options so it's difficult to estimate what prices we would get filled at, but based on the last transaction prices we could buy the Jan 2025 $25 call and sell the $25 put if we believe that the stock is going to stay above $25 in a bit over 2 years time.
Alternatively we could buy a call vertical (e.g. buy $24 call and sell $25call, which would cost about $0.30) and finance it by selling put option with a much lower strike price (e.g. $15). In fact, it appears that for each put option we could buy multiple call verticals. With this strategy if the price stays above $25 at expiration then we could be up for a huge profit.