Hey trader,
Something’s happening with Chinese stocks.
BABA jumped 5% this morning while Baidu was up 4.5%.
It would be easy to hand the credit to the China AI headlines.
But I think the move started somewhere more specific.
KWEB is the ETF that tracks China’s internet names. When BABA and Baidu run, KWEB tends to follow.
Today the Block Hunter Console picked up on a KWEB trade that picked up 14,000 August 28, $30 calls in one go:
That’s a lot of money to drop on a single trade, even for an institution.
So, what do they see that the rest of us are missing?
Let me show you.
Why the Dealer Has to Buy
The 14,000 calls printed on the console started me down this road.
It turns out there were more options trades hiding in plain sight.
KWEB traded 43,000 calls against 7,000 puts, near twice its average call volume.
That basically tells us institutions were buying, forcing the dealers (market makers) to hedge.
When a market maker sells you a call, they are now short those same calls.
That position carries negative delta and negative gamma. Essentially, every dollar the stock moves higher puts them in the hole.
To offset negative delta, the dealer has to buy the underlying stock.
When price rises, the dealer buys more stock to stay hedged. That buying reinforces the move the calls were betting on.
This is a positive feedback loop. It runs in the bullish direction.
There is asymmetry built in here.
The call delta can climb toward one as price rises. It fades only toward zero when price slips.
The Target They Left Behind
Now, that single print gives you four pieces of information. It hands you the symbol, the direction, the target, and the clock.
The symbol is KWEB. The direction is up, because they bought calls.
The target sits at the $30 strike. That is where the institution placed its bet.
The clock is the August 28 expiration, 39 days out from today.
KWEB is trading near 26 right now. The first job is clearing resistance at 28.
Once 28 gives way, the path opens to 29, then toward that 30 target.
How I’m Playing It
Here’s the idea I came up with.
I want to lean on the same read the institution left behind. A defined-risk spread lets me do that without chasing the stock.
I’m looking at the 21 August 28/30 call vertical. It prices around 60 cents, with the short 30 strike bringing in about 39 cents.
A vertical spread has me buy the $28 strike call and sell the $30 call for a net debit (the $0.60).
That puts my breakeven at 28.60. My risk is capped at the 60-cent debit.
Here is the framework in full:
- Setup: 21 August 28/30 call vertical in KWEB, with price near 26 and resistance overhead at 28.
- Trigger: enter anticipating the breakout, then add on a push through 28.
- Target: $29 delivers roughly a 70% gain, with the institution’s own target parked up at $30.
- Cost: about 60 cents for the spread.
- Max risk: the 60-cent debit, since this is a defined-risk vertical.
- Timeframe: 32 days to the 21 August expiration.
If KWEB can reach $29 inside the next 32 days, this trade is home free. That one move covers the whole play.
The headlines will keep talking about China and AI. The print already showed you where the money went.
However, I’d never have seen any of this without the Block Hunter Console. That’s where everything starts.
Now is your chance to get the console before the next trade goes out. Plus, you’ll get access to a wealth of education and training designed to help you take your trading to the next level.
Click Here to learn more about Block Hunter.
Brandon Chapman, CMT
Creator of Ghost Prints
