Market speculators seeking highly probabilistic trades from securities generating unusual options activity may consider iQiyi (IQ). An online entertainment service provider based in Haidian, China, iQiyi offers movies, television dramas, variety shows and other video-based content. But because it’s tied to the fortunes of the world’s second-largest economy, IQ stock is geopolitically exposed.

After tensions started to thaw between the U.S. and China, the war of words recently heated up again. On Friday, President Donald Trump declared that he will no longer be “Mr. NICE GUY” with China on trade. In a social media post, Trump stated that Beijing had broken an agreement with Washington. Subsequently, IQ stock dropped just over 3%, bringing its five-day loss to 4.48%.

Still, it should be noted that the president stated that he would speak with Chinese President Xi Jinping and broadcasted some optimism that a solution would be reached. As such, the latest outburst may be yet another example of the White House’s gamesmanship: talk tough, back off, then negotiate. It’s weird but there might be a method to the madness.

Either way, IQ stock represented one of the securities generating unusual options volume. On Friday after the bell, total options volume reached 25,729 contracts, representing a 69.77% lift over the trailing one-month average. Call volume landed at 3,712 contracts, while put volume hit 22,017 contracts, yielding a put/call ratio of 5.93.

On paper, that’s not necessarily a great sign — and options flow data confirmed the same. Focusing exclusively on big block transactions likely placed by institutional investors, options flow showed that net trade sentiment slipped to $648,200 below parity. Most of the trades were debit-based put options expiring either late this year or early next year, indicating “direct” pessimism.

Despite the overhang, bold contrarians may have an opportunity to consider the opposite side of the trade.

Market Breadth Data Potentially Signals a Reversal in IQ Stock

As an investment, iQiyi is a difficult nut to crack. Since the start of the year, IQ stock is down more than 20%. It’s badly underperforming both U.S. mainline benchmarks as well as key Chinese stocks. However, as an options trade, IQ is quite enticing.

Generally speaking, investors are asking about the “why” of a particular enterprise or asset. Options traders, on the other hand, are focused on the “how” — how much, how fast and how likely. The latter point is arguably the most important aspect of deciphering opportunities in the derivatives market.

Naturally, different traders utilize different approaches regarding market opportunities. Still, everybody starts with a baseline probability. For IQ stock, the chance that a long position for any given week will be profitable is only 49.4%. Functionally, this ratio is calculated by a simple rise-over-run-style equation: take the number of positive weeks divided by the total number of weeks in the dataset.

Through this mathematical exercise, we determine that IQ stock features a slightly negative bias. However, it would be inaccurate to state that this probability applies to all sentiment regimes. Certain cycles may yield odds that differ greatly from the baseline.

That’s the opportunity we have with IQ stock. In terms of market breadth (or the study of accumulation and distribution patterns), IQ printed a “2-8-D” sequence: two up weeks, eight down weeks, with a net negative trajectory across the 10-week period.

Since its public market debut, the 2-8-D sequence has flashed nine times — and all nine times, the price action popped higher, with a median return of 8.27%.

Of course, people should be wary of 100% sequences: they’re practically begging to go wrong eventually. At the same time, the constant back-and-forth of presidential rhetoric suggests that a reversal could be in play.

Rolling the Dice on iQiyi

If you want to play the numbers game, aggressive but rational traders may consider the 1.50/2 bull call spread expiring July 18. This transaction involves buying the $1.50 call and simultaneously selling the $2 call, for a net debit paid of $18. Should IQ stock rise through the short strike price at expiration, the maximum reward is $32, or a payout of nearly 178%.

Here’s the deal. Based on median performance information, IQ stock is projected to reach around $1.84 by the July 18 expiration date. That’s enough to exceed the aforementioned trade’s breakeven price of $1.68, but falls short of triggering the maximum reward.

Still, we’re talking median performances — the actual performance could be better or it could be worse. That’s where the risk comes in. On the other side of the coin, the behavioral state of the 2-8-D sequence suggests that the bulls may have the edge.

If you believe they will maintain control of the market, the 1.50/2 bull spread is tempting. If you have some pocket change burning a hole in your pocket, there are worse ways to spend $18.