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Hang Seng Index Reclaims 25,000: Warrant Positioning Now Depends on 'Distance,' Not Just Direction

Hang Seng Index $Hang Seng Index (800000.HK)$ It closed today at 25,008.6 points, up 327.5 points or 1.33%, with an intraday high of 25,221.44 points and both the low and opening levels at 24,825.02 points. Since rebounding from the late-June low of 22,518 points, the index has accumulated a gain of nearly 2,500 points, marking the first clear move back above 25,000 during this rally.

We all likely have our own views and forecasts for the market ahead. Let’s first assess how risk is currently distributed between bullish and bearish positions, based on technical levels and warrant terms.

25,220 is the first resistance level; the zone between 24,970 and 24,825 has become the short-term support area

The Hang Seng Index rose to 25,221 today but failed to close near its intraday high, making the 25,200 level a natural first short-term resistance.

The upper Bollinger Band currently sits around 24,971. The Hang Seng Index closed slightly above this band, indicating a clear acceleration in upward momentum, though it has also started deviating from its recent volatility range. On the RSI front, the shorter-term indicator has risen to 82.5, while another RSI reading stands at approximately 65.4—reflecting strong momentum, though entry points are no longer as comfortable as they were two weeks ago.

In the short term, we can focus on three key levels:

Technical Position Reference Significance

Around 25,220 Today's high; first short-term resistance

Around 24,970 points – the upper Bollinger Band: can it shift from resistance to support?

Around 24,825 points – today's low and opening level; the first key defensive position

Around 23,729 points – middle Bollinger Band; represents a deeper-level trend support

If the Hang Seng Index holds above 24,970 to 25,000 points and then breaks through 25,220 points, the uptrend could continue. Conversely, if it retreats back into the Bollinger Band, watch closely whether 24,825 points can hold.

What matters most right now is not whether the index has peaked, but that after consecutive gains, the magnitude of a normal short-term pullback could widen. This will directly affect the choice of call warrant knock-in levels.

Call warrant distribution: Nearly 70% of products have knock-in levels more than 10% away

Based on the product overview using a fixed issuer screening criterion (excluding JPMorgan and Societe Generale), there are currently 1,092 Hang Seng Index call warrants in the market.

Distribution by distance to call price:

Call warrant knock-in distance Number of products Percentage

Less than 3% 13 stocks 1.2%

3% to 5% 80 products 7.3%

5% to 8% 140 stocks 12.8%

8% to 10% 106 stocks 9.7%

Above 10% 753 stocks 69.0%

Overall, bull warrant supply is clearly concentrated in products with more distant knock-in levels. Only 93 products—approximately 8.5%—have a knock-in distance of less than 5%; in contrast, nearly 70% of bull warrants have a knock-in distance exceeding 10%.

This distribution reflects that the market offers ample choices with more distant knock-in levels. Given that the Hang Seng Index has already accumulated a notable rally, investors need not focus solely on near-knock-in bull warrants merely to achieve higher leverage.

Both representative bull warrants listed in the product overview share a knock-in level of 23,050 points:

UBS Group 55287: Knock-in distance approximately 7.83%, leverage 12.1x

Citi 54369: Knock-in distance approximately 7.83%, leverage 11.3x

The two products have similar structural terms; the main differences lie in their leverage and price. UBS Group 55287 offers slightly higher leverage, making its price more sensitive to movements in the underlying index. Citi 54369 has slightly lower leverage and a relatively higher price, suiting investors who prefer not to concentrate their positions in very low-priced products.

The knock-in level of 23,050 points is about 1,959 points away from the current level and therefore does not qualify as a near-knock-in bull warrant. Such terms are better suited for investors who are bullish on the Hang Seng Index continuing its short-to-medium-term rebound but wish to allow room for normal pullbacks.

However, a wider distance to call does not mean there is no risk. If the Hang Seng Index (HSI) faces resistance at 25,220 points, bull warrant prices would still decline along with the index, though the immediate risk of being called back is relatively lower.

Bear warrants are polarized in distribution, with products having a call distance of less than 3% significantly outnumbering bull warrants.

Excluding JPMorgan and Société Générale, there are a total of 1,070 HSI bear warrants in the market.

Bear Warrant Call Distance Number of Products Percentage

Less than 3% 240 22.4%

3% to 5% 93 stocks 8.7%

5% to 8% 157 stocks 14.7%

8% to 10% 139 stocks 13.0%

Above 10% 441 stocks 41.2%

The distribution of bear warrants differs from that of bull warrants. There are 240 bear warrants with a call distance of less than 3%, accounting for 22.4%, significantly higher than the 1.2% for bull warrants. This indicates a large supply of highly leveraged bear warrants trading close to the current HSI level in the market.

For investors who believe the Hang Seng Index (HSI) may experience an intraday pullback near the 25,200 level, at-the-money bear warrants are indeed more sensitive. However, their drawback is straightforward: if the HSI continues to break higher, these products could quickly approach their call price.

The representative bear warrants selected in the product overview deliberately avoid such extremely tight call-price terms:

UBS Group 60772: Call price at 26,988 points, approximately 7.91% away from current levels, with 13.1x leverage

Citi 65799: Call price at 27,000 points, approximately 7.96% away from current levels

Both products have nearly identical call prices, each about 2,000 points above the current index level. UBS Group 60772 offers 13.1x leverage and provides more complete term transparency; Citi 65799’s original product documentation does not disclose usable leverage data, so leverage cannot be reliably estimated or back-calculated based solely on the product price.

These bear warrants are not intended for capturing very short-term fluctuations of just a few dozen points. Instead, they are better suited for positioning when one expects the HSI to encounter resistance near 25,200 and potentially undergo a more sustained correction. Compared to bear warrants with call distances under 3%, they allow greater upward room for index movement while avoiding the extreme leverage typical of the tightest-call products.

Current product strategy

If bullish on the HSI breaking above 25,220 points, investors should not focus solely on maximum leverage. The index’s short-term RSI is already elevated; using bull warrants with call distances of 5% to 8% or even wider typically offers better resilience against volatility ahead of a breakout. UBS Group 55287 and CSC Financial 54369, both with a 7.83% call distance, fall precisely within this range.

Even if expecting pullback pressure near the 25,200 level, investors need not necessarily choose bear warrants with call distances under 3%. UBS Group 60772’s call price of 26,988 points provides a meaningful buffer—if the bearish view proves incorrect, the warrant won’t be immediately called even if the HSI rises several hundred points further.

For those with a directional view but wishing to avoid the knock-out risk inherent in bull/bear warrants, equity-linked warrants (ELWs) can serve as an alternative. The HSI call warrants featured in the product overview are primarily 2% in-the-money to 0.5% out-of-the-money, offering effective leverage of approximately 7.2x to 9.7x; put warrants are roughly 3.2% to 4% out-of-the-money, with leverage around 7.7x to 7.8x. The trade-off is that investors must also account for implied volatility, premium, and time decay.

The HSI has reclaimed the 25,000 mark, confirming a stronger short-term trend. However, the upper Bollinger Band and elevated short-term RSI serve as reminders that entry positioning now requires greater discipline. When selecting bull warrants, don’t push the call price too close simply because the uptrend appears strong; similarly, with bear warrants, don’t assume a pullback must happen immediately just because the index looks overbought.

Next, watch whether the level of 25,220 can be broken through, and whether the range from 24,970 to 24,825 can transition from a resistance zone into genuine support.

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