China’s Stock Rally Is Met With Skepticism in Options Market

While Chinese stocks traded in Hong Kong climbed for a fourth straight month, derivatives wagers show investors are skeptical about the market.

The Hang Seng China Enterprises Index has rebounded 23% from a low in April, and implied volatility for the gauge posted its lowest monthly average in four years. But compared with actual swings, the measure appears high. That means the derivatives remain expensive, and investors may be more reluctant to buy upside calls outright, according to BNP Paribas SA strategists Jason Lui and Scarlett Liu.