港股窩輪Jenny

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GigaDevice and Luxshare Precision both offer high gearing, but which set of warrant terms is harder to choose?

On July 17, GigaDevice (03986) and Luxshare Precision (02475) both posted single-day declines exceeding 10%:

– GigaDevice closed at HK$533.50, down 11.08%

– Luxshare Precision closed at HK$53.45, down 10.92%

Both stocks show high short-term reward-to-risk ratios in the product overview:

– GigaDevice:92.4 points, leaning bullish

– Luxshare Precision:90.2 points, leaning bullish

This type of scenario—'sharp price declines accompanied by rising reward-to-risk ratios'—typically doesn't signal the end of the downtrend, but rather indicates that the drop has been substantial enough to create room for speculative rebounds.

The issue is, even though both stocks meet conditions for a rebound, their current warrant terms may not be suitable for retail investors.

First, comparing price trends: GigaDevice has fallen more deeply, while Luxshare remains relatively stable

GigaDevice's decline has been more severe:

– Down over 5 days 28.15%

– Down over 10 days 41.85%

– Down over 20 days 36.71%

– Intraday low at RMB 524.50, high at RMB 587.50

Luxshare Precision’s decline has been relatively mild:

– Down over 5 days 15.16%

– Down over 10 days 15.53%

– Down over 20 days 15.53%

– Intraday low at RMB 53.25, high at RMB 60.00

Therefore, GigaDevice’s score of 92.4 is closer to the risk-reward ratio for a rebound following deep oversold conditions; Luxshare Precision’s score of 90.2 reflects an opportunity to stabilize after a milder decline.

Purely from the perspective of underlying stock structure, GigaDevice may offer a larger rebound potential, but with higher volatility and risk of failure; Luxshare’s upside may be more limited, but it also doesn’t require as extreme a recovery as GigaDevice.

Looking at the warrants: GigaDevice’s strike price is nearly detached from the current spot price

The strike prices of the three call warrants representing GigaDevice are as follows:

– Huatai 29452: HK$1,066

– Shinhan 29460: HK$1,200

– BNP Paribas 29569: HK$1,600

Compared to the current share price of HK$533.50, they are out-of-the-money by:

– 99.8%

– 124.9%

– 199.9%

Implied volatility is as high as:

– 151.64%

– 147.16%

– 140.90%

Premiums range between 115.56% and 206.47%。

The main issue with this group of products is not low leverage, but rather that their strike prices are far above the underlying stock’s current price. Even if GigaDevice rebounds 10% from HK$533.50 to approximately HK$587, it would still be significantly below the lowest strike price of HK$1,066.

Therefore, the value of these products will heavily depend on time remaining, implied volatility, and how much option premium the market is willing to pay. A rebound in the underlying stock does not guarantee a proportional gain in the warrant.

The actual leverage of the three products is only about 2.4x to 3x, indicating relatively low directional sensitivity.

Luxshare's warrants are similarly expensive, but their strike prices are somewhat more reasonable.

The strike prices of the three Luxshare Precision call warrants are:

– BOC 14956: HK$88.88

– Morgan Stanley 14965: HK$80

– Huatai 15150: HK$85

Relative to the current price of HK$53.45, the degrees of being out-of-the-money are:

– 66.3%

– 49.7%

– 59%

Implied volatility ranges from approximately 93.56% to 95.55%, with premiums between roughly 63.33% and 77.04%, and actual leverage of about 2.9x to 3.1x.

Compared with GigaDevice, Luxshare’s warrants remain deeply out-of-the-money, though at least not as extreme as 100%–200% out-of-the-money. Among them, Morgan Stanley 14965, with a strike price of HK$80 (49.7% out-of-the-money), is the closest to the current price and carries the lowest premium of approximately 63.33%.

However, even if Luxshare rebounds from HK$53.45 to HK$60—a gain of over 12%—it would still be far from the HK$80 strike price. Thus, this set of warrants is likewise not ideal for capturing short-term rebounds alone.

Comparing the two: a higher reward-to-risk ratio for the underlying stock does not imply a higher reward-to-risk ratio for its warrants.

If comparing only the underlying stocks:

– GigaDevice has fallen more sharply, offering greater potential rebound elasticity.

– Luxshare Precision has declined less, making price recovery relatively easier.

If comparing warrant products:

– GigaDevice’s warrants feature significantly more aggressive terms in terms of strike price, implied volatility (IV), and premium, resulting in higher structural risk.

– Luxshare’s warrants are slightly closer to being at-the-money but still deeply out-of-the-money, and their cost is not cheap.

– Both warrants offer only around 3x effective gearing, lacking the high directional sensitivity that would justify their elevated risk.

Thus, the real challenge this time isn’t determining which stock will rebound, but rather the current market’s lack of attractively priced warrants—those with near-the-money strikes, low premiums, and reasonable implied volatility.

In such cases, waiting for better warrant terms can be more prudent than rushing into a seemingly low-priced warrant. A low face value never equates to favorable terms.

If you could only pick one between GigaDevice and Luxshare to study for a rebound, would most people lean toward GigaDevice, which has seen a deeper decline, or Luxshare, whose terms are relatively less extreme?

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