Chinese e-commerce giant JD.com (US:JD, HK:9618) has had a challenging start to the year, with its stock falling by 41.6% on Hong Kong’s HKEX and by 43.4% on the Nasdaq. The company’s struggles reflect a broader trend of Chinese stocks experiencing volatility amid regulatory issues, geopolitical concerns, and economic uncertainties.

Back in April, Chinese stocks initially saw a rally fueled by signs of economic recovery and following Alibaba’s (US:BABA, HK:9988) monumental decision to split into six divisions, which could potentially unlock shareholder value but also reduce regulatory scrutiny.  The optimism faded fast after rival company Pinduoduo (US:PDD) was suspected of having malware that opened the door to unprecedented access to users’ data. These allegations added to the growing skepticism about the recovery of the Chinese economy.

Geopolitical fears further contributed to the sell-off as rumors circulated about potential executive orders by the Biden administration that would restrict American investments in certain Chinese tech companies and sectors like semiconductors. Such actions aimed to limit China’s technological development and have turned tech companies into pawns in the escalating global battle.

Glimmer of Hope

JD.com’s recent financial results provided a glimmer of hope amid these challenges. The company surpassed analyst expectations with its Q4 results, posting a 1.4% year-over-year increase in revenue and significant growth in adjusted net income and EPS.

CEO Xu Lei announced his departure for “personal reasons” after just over a year in the role, while Sandy Xu, formerly JD’s CFO, assumed the position. These management changes added another layer of uncertainty to Beijing-based company’s future prospects.

However, a dramatic surge in options activity in JD’s U.S. listing on May 31 caught the eye of Fintel journalists, with several trades showing up in the Unusual Options Flow Tracker.

The most recent data shows a significant number of put and call options being bought and sold, suggesting increased speculation and uncertainty among investors.

To be precise, in total there was $22.36 million worth of total net option premium sold, which suggests traders were blacing bearish bets on JD stock.

Reflecting Worry

The most significant activity occurred in the Put options market with over $50 million of put premium purchased. This means that a large number of investors are worried that JD’s share price could resume its share price decline and look to hedge their position against any further weakness.

When an option’s premium is larger, it traditionally means that it has greater time to expiry or greater implied volatility.

If we dig a little further on JD’s Options Flow page, each specific trade is shown along with the level of options premium purchased or sold.

Some of the largest single trades included the purchase of 17,053 options at 3:54 pm with a premium of $12.3 million paid. We understand this a large bearish bet for an investor to protect his position in case JD’s share price falls further.

There was also a large sale of put options that occurred at 2:53 pm with 5,476 options bought and a premium of 9.74 million paid. We interpret this trade as a bullish bet, because the trader will profit if JD shares rise and the option is not exercised.

A small snippet from the trade history is shown below for reference.

The Put/Call Ratio, indicating the number of disclosed open put option positions divided by open call options, currently stands at 0.42 for JD.com. While a ratio below 1 generally suggests a bullish sentiment, the recent options trading activity signals mixed sentiments and a degree of caution among market participants.

Regardless of the insight options can give on into the underlying sentiment for the stock, JD.com’s future path remains uncertain, with external factors expected to continue playing a role in the share price direction for quite some time.

This article originally appeared on Fintel

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