Someone apparently knew what was coming. And they bet big on it.
The China Securities Regulatory Commission (CSRC) said it is monitoring developments in a US federal lawsuit where Susquehanna International Group (SIG) alleges that unknown traders made at least $100 million from well-timed options bets placed just before Beijing announced a crackdown on illegal cross-border securities trading. The CSRC and other Chinese regulators penalized Futu Holdings and Up Fintech on May 22 for unlicensed cross-border trading, sending shares of both companies tumbling.
Here’s where it gets interesting. SIG claims that in the roughly two weeks before that announcement, between May 7 and May 21, traders scooped up approximately 200,000 short-dated put options on those very same companies. The initial investment was around $12 million. The payout exceeded $100 million, a return north of 900%.
The mechanics of the alleged scheme
Put options are essentially bets that a stock’s price will fall. Buying short-dated puts, ones that expire quickly, is a particularly aggressive wager because time decay works against you. Unless, of course, you already know the stock is about to crater.
