Tudor Leads Hedge Funds Using Options to Bet on China Stocks
By Miles Weiss - May 26, 2011
Paul Tudor Jones and Louis Moore Bacon, in a trade used by several hedge-fund managers in the first quarter, loaded up on options that pay off big if Chinese stocks rebound.
Tudor Investment Corp. of Greenwich, Connecticut, and New York-based Moore Capital Management LLC each bought at least 7 million options on the iShares FTSE China 25 Index Fund (FXI) during the quarter ended March 31, according to regulatory filings. Other money managers who used options to bet on or against the FTSE 25 included Philippe Jabre, George Weiss and Brian Stark.
The cost of buying options pegged to Chinese markets has fallen along with volatility there, said Jonathan Masse, senior portfolio manager at Baochuan Capital Management. Investors are exploiting the decline to make low-cost bets that Chinese stocks, having lagged behind those in the U.S. and Europe, will rebound as Beijing concludes a series of interest rate increases designed to check inflation.
“A lot of people are taking advantage of the low volatility to make plays,” said Masse, whose Walnut Creek, California-based hedge fund specializes in China. “There is a big reversion trade expected, where the Chinese markets would catch up in terms of performance.”
bloomberg.com
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