Investors Hedge Against China Risks Amid Geopolitical Tensions
Market volatility follows a familiar pattern in early 2026 as geopolitical tensions resurface. The Cboe Volatility Index spiked briefly before retreating, masking underlying investor anxiety. Behind the calm surface, traders are accumulating protective puts on China-focused ETFs at triple the normal volume.
Nearly 600,000 put options across three China ETFs signal growing risk aversion. "This looks like preemptive positioning rather than reaction to specific news," notes Christopher Jacobson of Susquehanna International Group. The moves coincide with deteriorating US-China relations following Beijing's criticism of recent US policy actions.
Tech earnings uncertainty compounds the defensive positioning. While major indices recovered their losses by week's end, the options market tells a different story - one where smart money prepares for potential turbulence in Chinese assets and big tech disappointments.
