Already under siege amid pro-democracy protests, the iShares MSCI Hong Kong ETF EWH could see more downside, something options traders are betting.

What Happened

The protests commenced in the Chinese Special Administrative Region (SAR) several months ago following the passage of a bill that would've paved the way for criminals there to be extradited to mainland China where they would face a more complex legal system and potentially stiffer punishments.

While Hong Kong leaders have quashed that bill, the protests have carried on with demonstrators facing often hostile acts from local authorities.

“Amnesty International has warned of an 'alarming pattern of violence used by Hong Kong police at anti-government demonstrations over the past three months, with officers reportedly beating protesters before and after the arrest,” reports The Guardian.

Why It's Important

The impact on Hong Kong stocks and EWH is palpable as highlighted by the exchange-traded fund residing nearly 14% below its 52-week. While the fund has bounced off its most recent lows, some options traders are betting on more downside for the largest New York-traded Hong Kong ETF.

Interestingly, bearish options traders are buying some time, betting on declines for the ETF in December.

“Specifically, 26,000 contracts apiece have crossed the tape at the EWH December 24 put and December 23 put, establishing these back-month strikes as far and away from the most active options on the session,” according to Schaeffer's Investment Research. “(Third place goes to the December 25 call, which has generated volume of only about 5,000 contracts).”

EWH closed Thursday at $23.38.

What's Next

The $1.62 billion EWH, which is over two decades old, follows the MSCI Hong Kong Index and holds 46 stocks. The aforementioned protests and equity market declines have taken on a toll on EWH as investors have pulled nearly $477 million from the Hong Kong ETF during the third quarter.

“For context, those December 24 puts were opened as recently as Sept. 13 for $1.00 apiece, and today's roll was accomplished by closing them out at $1.50 while buying the December 23 puts for $1.00 -- effectively trimming the net outlay on a continued EWH decline to $0.50 per contract,” according to Schaeffer's.