□ Li Jin, Director of Faxing Securities (Hong Kong) Co., Ltd
Influenced by the sharp fall of the peripheral stock market, Hong Kong shares have recently undergone a major adjustment. Most blue chip and state-owned enterprise share prices have dropped significantly, erasing the cumulative increase in recent weeks. Some investors who entered the market at a high level earlier should review their holdings and strictly implement stop loss.
Warrants are different from stocks. When the market situation weakens, stock investors may choose to wait a little longer. However, warrant investors do not have the right to wait. Instead, they should implement the original stop loss plan. The reason is that the terms of the warrants in hand have changed from discount to out of price. When the exercise price is more and more deviated from the spot price of the relevant assets, it also indicates that the risk is getting higher and higher, so investors should stop losses rationally and decisively. If you want to bounce back, you can stop loss and arbitrage funds first, and change to warrants whose terms are more suitable for the current market conditions, so as to capture the rally of positive shares.
HSBC announced its medium-term results on Monday. The first half profit increased by 25%, which was better than the market expectation. The stock price rebounded strongly and soared more than HK $3 on Tuesday. Relevant warrants also traded actively, increasing from an average of HK $580 million per day last week to HK $1.28 billion on Tuesday, accounting for 8.3% of the total transactions in the warrant market.
It can be seen from the transaction distribution of HSBC Securities that investors are mainly concentrated in some medium-term (expiring from November to December) and slightly out of price (exercise price is around HK $148) warrants. Such warrants are more sensitive to implied volatility than discount and in price warrants. Once the implied volatility falls, such warrants will also be affected greatly.
HSBC has been running amok for more than two months from HK $142 to HK $147. The implied volatility of its warrants has been high, but it began to see a slight correction before and after the recently announced results. Investors should pay close attention to the changes in the implied volatility.
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
