Stock market traders put money into protective bets against Chinese company shares last week, even as President Donald Trump’s warnings about tariffs on Greenland grabbed most of the attention across Wall Street. Just three weeks into 2026, markets are showing the same behavior as last year. Trump issues threats, stocks get shaky, things calm down after a few days, and shares start climbing again. The pattern has become routine for those tracking market swings. The Cboe Volatility Index, which measures fear in the market, shot up on Tuesday but quickly dropped back down. By Friday, it sat lower than where it started the previous week. The index’s futures ended the week looking almost the same as before. Cboe Volatility Index (VIX) one-month chart, Source: Cboe.com But behind the scenes, some traders were taking steps to protect themselves. They worried about two main things. Problems that could hurt Chinese stocks and the chance that big tech companies might report weak earnings. Investors snapped up around 400,000 put options set to expire in March for the iShares China Large-Cap ETF. They also grabbed 20,000 contracts in the KraneShares CSI China Internet ETF and 150,000 puts in the Xtrackers Harvest CSI China A-Shares ETF. Put options let traders profit if prices fall or limit their losses. Christopher Jacobson works as co-head of derivatives strategy at Susquehanna International Group. He said in a written note, seen by Bloomberg, that no clear reason drove these moves. The investors might just be getting ready for worse relations between the United States and China, especially after China criticized the recent trade agreement between America and Taiwan. Traders getting better at the TACO trade Market experts say investors have gotten better at handling what they call the TACO trade. This limits how high fear spikes and how long it lasts. Amy Wu Silverman heads derivatives strategy at RBC Capital Markets. She described Trump’s approach this way: “It seems very much like he’s playing this playbook of like, ‘I’m going to go in kind of mad dog style. No one really knows what I could do.’ And then you almost need the market to have a tantrum and then he will back off.” She added that when these bumps show up, they give good chances to bet against fear or reach for gains. Even serious global tensions have barely moved the fear gauge. Trump talked about the Greenland situation as a national security matter. China might use similar reasoning when discussing Taiwan. Antoine Bracq runs advisory services at Lighthouse Canton. He pointed out that “Markets appear increasingly desensitized to breaches of international laws — whether in Venezuela, Iran, or Greenland.” He said traders showed the same lack of concern about military drills near Taiwan and the ongoing war in Ukraine. Tech earnings protection picks up Traders also bought protection against drops in chip company stocks. Big tech firms including Apple Inc., Tesla Inc. and Meta Platforms Inc. will report their earnings this week. Investors picked up January 30 put options in Nvidia Corp., Oracle Corp. and Broadcom Inc. Bracq said market drops will likely stay brief as long as people believe the American economy stays strong. He thinks a VIX reading above 20 might be a good time for everyday investors to sell. But he warned that disappointment from tech companies or a weaker job market could change the current low-fear environment. Retail investors keep buying when prices dip. This helps keep fear spikes short, especially while data suggests more Federal Reserve rate cuts and continued economic growth. That could shift if joblessness and rising prices get bad enough to stop these buyers. Antoine Porcheret handles institutional structuring for the UK, Europe, the Middle East and Africa at Citigroup Inc. He said retail traders have been a big part of the buy-the-dip strategy. “So that is a risk if those buyers disappear, which can happen with rising unemployment if they have less disposable income,” he explained. Market structure changes draw attention Analysts at UBS Group AG noted that zero-day-to-expiry options recently created a shorter gamma profile. This could cause bigger swings during the trading day as dealers adjust their positions. Traders are also watching VIX dealer positions and exchange-traded products tied to the index. These products have seen money leave recently. When people cash out volatility bets during market stress, it can soften VIX jumps. With lighter positions now, that steadying effect might weaken, possibly making the VIX react more sharply. The hedging activity comes as Chinese tech stocks continue rallying despite economic challenges. As reported by Cryptopolitan previously, China has announced plans to invest up to 70 billion dollars in its domestic chip industry, positioning itself as a serious rival to American technology firms. AI and robotics advances have pushed Chinese tech shares higher this year, even as the broader economy faces headwinds from weak consumer spending and a struggling property sector. Market watchers note this self-sufficiency push has shifted investor perspectives on Chinese companies. Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free .
