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Last week we exposed the ugly reality sitting just below the headlines of the Chinese stock market - the massive liquidation threat from so-called 'snowball derivatives'.

Specifically, we warned that for those looking for the tipping point, pay especially close attention to the CSI 1000 Index dropping below the 5,300 level, where a wave of knock-ins triggers could accelerate exponentially.

According to Guotai Junan Futures, there are about 30 billion yuan ($4.2 billion) of snowball derivatives products tied to the CSI 1000 Index are near levels that trigger losses at maturity, according to Guotai Junan Futures Co, as the stock rout in #China's stock market pushes the derivatives to near knock-in levels. 

Another 60 billion yuan of the derivatives are 5%-10% away from their knock-in thresholds!

Finally, as Sino Market points out, most Snowball derivatives were opened from Feb to April 2023. 

Since the downside knock-in put barriers are set to 75% or 80% of the spot price, dealers estimate that most of those are set at 5,180 points on the CSI 1000 index...

To read more visit Zero Hedge.

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