We aren’t the only ones concerned about China’s recent stock market underperformance.  Options traders were busy last week buying downside bets on the Chinese Index fund FXI:

FXI – iShares FTSE/Xinhua China 25 Index Fund – Bearish options activity was observed on the China exchange-traded fund this morning amid a nearly 2.5% decline in shares to $40.78. Investors expecting further declines initiated bearish reversal plays on the ETF in the September contract. Approximately 10,000 calls were shed at the September 44 strike price for 80 cents apiece in order to partially finance the purchase of 10,000 put options at the now in-the-money September 41 strike for an average premium of 1.96 each. The net cost of the reversal amounts to 1.16. Thus, profits will begin to amass to the downside if shares fall beneath the breakeven point at $39.84 by expiration. Additional plain-vanilla put buying in the amount of 5,000 lots was seen at the September 41 strike for 1.96 per contract. Investors who did not fund their purchase of puts by selling calls will not start to profit unless the FXI declines at least 4% from the current price through the lower breakeven point at $39.04. Increase investor uncertainty regarding the future price of the fund is reflected by the 11% rise in option implied volatility today to a high of 41%.