The Shanghai Composite slipped nearly 6 percent Wednesday, bringing its losses to more than 30 percent from its mid-June peak. Chinese demand concerns added to the mounting pressure on U.S. oil prices, and the commodity took a dive of more than 1 percent for the day.
"I think you stay short oil," said Kelly, adding that shorting commodities was one of "the easiest ways for a U.S. investor" to take advantage of the Chinese situation.
Alcoa—a commodities player with a hand in China—marked the unofficial start of earnings season with mixed quarterly results. In a CNBC interview, the company's CEO Klaus Kleinfeld said a slowing Chinese economy could hold back growth.
Trader Dan Nathan sees little "silver lining" around Alcoa currently. Alcoa shares—which have fallen more than 33 percent this year—could have more downside, trader Pete Najarian added.
If China's A-Shares mount any kind of rally, trader Dan Nathan would look to short them through the Deutsche X-trackers Harvest CSI 300 China A-Shares Fund.
He noted, though, that a trader would have to be "nimble" to execute the short.
Long AMAT, AAPL, BABA, BAC, BMY, BP, CSX, DISCA, DKS, FOXA, GE, KKR, KO, LLY, MRK, PEP and PFE. He is long calls AAPL, ABX, BAC, BBY, C, CY, DAL, ETFC, FCAU, GS, HYS, INVN, JPM, LULU, LVS, MYL, NUAN, OC, PNR, S, SPY, SXC, SYY, TSLA, UAL, UBS, USB, VOYA, VZ, WYNN, XLF and ZIOP. Today, he bought MYL calls.
Dan is long JPM July put spread, TJX Aug put, TWTR, TWTR SEPT call spread, SO, INTC long July put, LVS long July Aug put spread and WDAY long July call fly. He is short SO Aug call. Today, he sold MSFT July call fly.
Steve Grasso is long AAPL, BA, BAC, DD, DECK, EVGN, FIT, KBH, MJNA, PFE, PHM, T, TWTR and GDX. His firm is long OXY, NE, RIG, FCX and WYNN. His kids own EFG, EFA, EWJ, IJR and SPY.
Brian Kelly is long BBRY, BTC=; TAN, TLT, TSL, euro, yuan and yen. Today, he sold U.S. 30-year bonds
Karen is long BABA, BAC, C, FINL, FL, GOOG, GOOGL, JPM, KORS, M, URI and BABA puts. She is short SPY. Her firm is long ANTM, AAPL, BAC, C, CVS, DIS, FBT, FINL, FL, GOOG, GOOGL, GPS, IBB, JPM, KORS, M, SUNE, URI, XBI, KORS call spreads, URI calls, KORS puts and SPY put spreads. Her firm is short IWM, SPY and MDY. Karen Finerman is on the board of GrafTech International. Today she bought BABA puts.