Analyzing the Future Direction of SMIC Based on Bull-Bear Certificates and Warrant Positions

As a core target in the Hong Kong stock semiconductor sector, against the backdrop of recent stock price adjustments, the capital flow dynamics in the warrant and bull-bear certificate markets have shown a differentiated characteristic of 'short-term sentiment release and medium-term firm positioning.' The position structure in the derivatives market clearly reflects marginal changes in market expectations for future trends.

Key Price Guidance

Regarding key price levels, SMIC's primary support is currently at HKD 61. If this level breaks, it may further retreat to an important support zone at HKD 57.9. Immediate resistance is seen around HKD 68.1, which corresponds to a recent minor consolidation platform and the vicinity of the 20-day moving average; stronger resistance lies at HKD 75.7.

Overall Position Dynamics: Short-Term Longs Being Passively Liquidated While Mid- to Long-Term Funds Continue Entering

Position changes in the two major derivatives categories show clear structural differences, reflecting the logic divergence among funds of different cycles:

Warrant Market: Long positions have steadily climbed, with call warrant street volume increasing from 1.913 billion contracts on February 27 to 1.980 billion contracts on March 3, marking a cumulative increase of 3.48%. On March 3 alone, there was a single-day increase of 2.98%. Amidst the underlying stock's adjustment phase, long-side capital continued entering to buy the dip, showing a divergence between capital inflow pace and stock price movement. Meanwhile, put warrant street volume briefly rose to 340 million contracts on March 2 before retreating to 330 million contracts on March 3, marking a 3.03% drop week-on-week. Bearish forces did not establish sustained positioning, keeping overall selling pressure relatively limited.

Bull-Bear Certificate Market: Short-term long positions suffered concentrated liquidation, with bull certificate street volume sharply declining from 483 million units on February 27 to 281 million units on March 3, resulting in a cumulative drop of 41.8%. From March 2 to March 3, there was a single-day decrease of 35.0%, primarily due to the mandatory recall of high-leverage bull certificates close to the current price after the stock broke below key support. Meanwhile, bear certificate street volume increased from 60.02 million units on February 27 to 68.91 million units on March 3, marking a cumulative increase of 14.8%. However, the overall position size of bear certificates is only 24.5% of bull certificates, showing that bearish forces remain relatively limited.

Exercise/Recovery Price Range Distribution: Short-term speculation on volatility, mid-term positioning for trends

The position distribution structure of derivatives clearly reflects the positioning logic of funds with different risk preferences:

- Bullish products: Short-term positions cleared, concentration of mid-to-long term positioning increased

Call warrant funds exhibit a three-tier distribution structure corresponding to different investment horizons:

Short-term Speculation Tier: Concentrated in the slightly out-of-the-money range with exercise prices between 62.93-69.04 yuan (out-of-the-money by 0.6%-10.4%), accounting for approximately 18% of street volume. Hedge ratios are generally in the 50%-60% range, with actual leverage of 3.5-4.5 times, suitable for short-term rebound trading.

Mid-term Positioning Tier: Concentrated in the moderately out-of-the-money range with exercise prices between 72.81-80.05 yuan (out-of-the-money by 16.4%-28%), accounting for over 35% of street volume. Products near the 73.85 yuan mark typically have actual leverage of 8-10 times, making it the focal point for mid-term capital positioning.

Long-term Trend Tier: Concentrated in the deeply out-of-the-money range with exercise prices between 98.15-102.98 yuan (out-of-the-money by 56.9%-64.6%), accounting for approximately 27% of street volume. Maturities are generally in the second half of 2026, with hedge ratios in the 20%-25% range and actual leverage of 4-6 times.

The remaining bullish warrants show a clear 'backward shift' in positions, with short-term high-risk positions largely cleared out.

The street-level holdings of extremely close-to-the-money bullish warrants with recovery prices of HKD 59-60 (recovery distance only 4.5%-4.6%) have dropped to less than 10%. Most of the previous highly leveraged short-term positions were either recovered or stopped out.

The highest concentration of bullish warrant street-level holdings lies in the recovery price range of HKD 56-58, reaching up to 42%, with a recovery distance of 9.3%-11.2% and actual leverage of 7-9 times, indicating that the remaining bulls believe this range will serve as a phase support.

The proportion of medium-to-long-term safer positions at recovery prices of HKD 53-53.8 and HKD 48-50.8 is 18% and 12%, respectively, with an actual leverage of 4-6 times, reflecting strong market consensus on a mid-term bottom around HKD 50.

– Bearish products: Only for speculative short-term pullbacks, with no intention of trend-based shorting

The position structure of put warrants and bearish warrants is highly similar, both focusing on short-term speculation and tail-end protection.

For put warrants, nearly 30% of positions are concentrated in the slightly in-the-money range of exercise prices between HKD 62.76 and HKD 68.9 (in-the-money by 0.3%-10.2%), with an actual leverage of 3.8-4.3 times, mainly driven by short-term funds speculating on temporary pullbacks. Over 40% of positions are deployed in the deep out-of-the-money range of HKD 49.79-52.55, primarily serving as tail risk protection contracts.

For bearish warrants, over 55% of positions are concentrated in the recovery price range of HKD 72.8-76.5, with a recovery distance of only 16.1%-21.7% and actual leverage as high as 5-7 times, again reflecting short-term funds speculating on pullbacks. Less than 30% of bearish warrant positions have recovery prices above HKD 80, with recovery distances generally exceeding 27% and actual leverage below 4 times, showing no strong motivation for active shorting.

Product Picks:

Investors optimistic about a short-term rebound may consider higher-leverage call warrants, such as those with exercise prices near HKD 75.8, offering approximately 4.3 times actual leverage, suitable for capturing volatility as the underlying stock challenges resistance levels. $CI-SMIC@EC2609B.C (19893.HK)$ or $BI-SMIC@EC2609C.C (26140.HK)$ If the rebound is seen as limited and the market expected to continue downward, investors can consider deploying put warrants as hedging or bearish tools, such as $BI-SMIC@EP2605A.P (21097.HK)$ or $HS-SMIC@EP2605A.P (21473.HK)$, with a strike price around 68.8 HKD, offering approximately 4.2x leverage.

For investors with higher risk tolerance who seek greater capital efficiency and are able to bear the risk of forced redemption, bull/bear contracts are a more direct choice. If you believe the support level at 61 HKD is solid, you may consider choosing a contract with a redemption price slightly further away.$SG#SMIC RC2609B.C (58405.HK)$, with a forced call level at 55.8 HKD, offering about 6.7x leverage. Conversely, if you anticipate that the rebound will end at the moving average resistance, you can pay attention to $UB#SMIC RP2812D.P (58818.HK)$ or $SG#SMIC RP2812V.P (58384.HK)$, with redemption prices set at 72.8 HKD and 73 HKD respectively, providing approximately 7.7x leverage, aiming to capture downside potential after a rebound fails.

Investors can choose appropriate products based on their own views on market direction, risk tolerance, and investment objectives.

Friendly reminder: This article is for reference only and does not constitute any investment advice.

The market data, views, and analysis contained in this article may change at any time without prior notice. We are not responsible for any loss or damage caused by reliance on the information in this article. Technical analysis only shows whether certain technical conditions are met; a comprehensive assessment of asset performance should be combined with other materials, and trading decisions should not be made solely based on this article. Please note that past performance is not indicative of future results. Remember to follow Jenny's 'Hong Kong Stock Warrants' account for more professional analysis articles and insights into investment opportunities in Hong Kong stock derivatives!$Hang Seng Index (800000.HK)$$Hang Seng China Enterprises Index (800100.HK)$$Hang Seng TECH Index (800700.HK)$

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