HK Stock Market Barometer | Super Earnings Week for HK Stocks!
HK Warrants Notes: Before the Hang Seng Index reaches 26,000, what truly deserves attention is actually the product differentiation among bank stocks, Tencent, BYD, and Xiaomi
The most misleading aspect of today's market is seeing the Hang Seng Index rebound to 25,858 and assuming that 'the broader market has fully turned bullish.'
However, if you break it down, not all sectors or products are moving in sync.
Indeed, the Hang Seng Index is strong, just a small step away from 26,000; yet the Hang Seng Tech Index is still hovering around 4,800, having not officially broken through 4,894. While indices appear positive on the surface, capital flows remain selective.
Therefore, today I’d rather not spend too much time reiterating 'Hang Seng support levels' or 'Tech Index resistance levels.' Those are merely market background context.
What truly warrants our attention are the following questions:
– Bank stocks are all rising together, but are the warrant terms for CCB, ICBC, and HSBC identical?
– Both BYD and Xiaomi are relatively strong—why are Xiaomi’s products harder to trade?
– Tencent has returned to its resistance zone—should call warrants or bull certificates be preferred for direct exposure?
– With the Hang Seng Index rising to this level, has the call/put warrant knock-out distance become too tight?
These are the key issues for today's warrant strategy.
First, let’s talk about the broader market: the Hang Seng Index $Hang Seng Index (800000.HK)$ is leaning stronger, but it’s no longer a phase where you can blindly chase gains.
The Hang Seng Index last traded at 25,858.88 points, with first support around 25,500 points and next support at 25,000 points; resistance levels above are at 26,061 points and 26,500 points.
This rebound has been very strong, and the short-term RSI has already risen to approximately 77.
The point is not that the Hang Seng Index (HSI) must fall, but rather that the market has moved from a 'low-level rebound' phase into a stage where it’s approaching resistance and investors need to be selective about products.
At this level, buying bull certificates shouldn’t be based solely on how high the leverage is—you should also ask yourself:
If the HSI first retraces to 25,500, will the call price hold up without triggering a knock-in?
For example, bull certificates with a call price near 25,210 are about 2.5% away from the current spot price. Such positioning might make sense for an intraday breakout play, but if you plan to hold for several days, this buffer may not be sufficiently wide.
The same logic applies to bearish positions.
HSI bear certificates with a call price near 26,500 can offer very high leverage, but 26,500 itself is precisely the next resistance level. If the HSI rallies further, these products could face early knock-in risk.
Therefore, the current situation isn’t simply 'bullish → buy bull certs, bearish → buy bear certs.' You first need to decide whether you’re trading a breakout, a pullback, or waiting for confirmation.
What’s actually most worth analyzing today are bank stocks.
ICBC, CCB, and HSBC have all been relatively strong recently, but the characteristics of their structured products differ significantly.
CCB is trading around HK$9.36, with near-term resistance at HK$9.64; ICBC is around HK$7.64, with its first resistance at HK$7.66 almost immediately ahead; HSBC is trading near HK$164.5, also close to its resistance at HK$164.6.
All three appear to be at resistance levels, but their terms differ significantly.
There are CCB call warrants with strike prices around HK$9.40, very close to the current share price, offering an effective leverage of about 10x and an implied volatility of approximately 20%.
These products are very straightforward.
If CCB breaks above HK$9.40, these products will more easily track the underlying stock; if the stock continues trading sideways between HK$9.20 and HK$9.40, they won’t lose sensitivity entirely like deeply out-of-the-money calls.
For CCB bull certificates, there are options with a call price near HK$8.10, providing a safety margin of over 10%. Leverage isn’t the highest, but they can better withstand a normal pullback in bank stocks.
ICBC is currently trading at HK$7.64, with immediate resistance at HK$7.66.
This is precisely the worst spot to chase based solely on 'high risk-reward potential.' With the underlying stock just two ticks away from resistance, call warrants with strike prices still above HK$8 will only perform well if ICBC achieves a genuine breakout.
ICBC bull certificates have call prices near HK$6, offering lower leverage but a wide safety margin. This makes them easier to manage for investors who remain bullish on the China banking sector trend but wish to avoid being shaken out by one or two days of pullback.
HSBC offers call warrants with strike prices close to HK$165, as well as bull certificates with call prices near HK$141 and HK$150.
This distinction is very practical.
For short-term breakout plays, choose at-the-money calls or bull certificates with closer call prices; for medium-to-short-term trends, opt for bull certificates with more distant call prices to reduce the risk of early redemption due to normal market fluctuations.
Therefore, the three bank stocks shouldn’t be bought together just because they’re all rising.
CCB is better suited for waiting on a breakout, ICBC requires clearer confirmation of resistance levels, while HSBC benefits from a more layered and complete product offering.
BYD $BYD COMPANY (01211.HK)$ versus Xiaomi $XIAOMI-W (01810.HK)$ : Similar direction, but vastly different product costs
Both BYD and Xiaomi have shown relative strength recently, but Xiaomi’s structured products are noticeably more challenging to navigate.
BYD is currently trading around HK$94.8, with resistance levels at HK$96.15 and HK$99.54. Some call warrants have strike prices close to HK$100, with implied volatility around 43%.
This warrant isn't cheap, but at least its terms align reasonably well with the underlying stock's technical targets.
If BYD breaks above HK$96.15, the next natural target would be close to HK$100. The call warrant’s strike price shows a relatively clear linkage with the underlying stock’s price movement.
Xiaomi is different.
Xiaomi is currently trading around HK$28.68, with resistance levels at HK$29.08 and HK$30.11. The implied volatility (IV) of both its call and put warrants generally ranges between 49% and 51%.
In other words, the market has already priced in significant volatility for Xiaomi.
Even if you’re right on direction—say, Xiaomi’s share price rises from HK$28.70 to HK$29.20—the warrant may not necessarily deliver an exaggerated return, as its price already embeds a high volatility cost.
Therefore, the main issue with Xiaomi warrants isn’t a lack of leverage, but rather:
Is the implied volatility (IV) you’re paying too high?
If you're merely bullish on Xiaomi rising gradually, bull certificates with distant call prices might be more straightforward than high-IV calls. However, choosing bull certificates with a call price near HK$27.50 leaves less than 5% buffer from the current price—a normal pullback could sharply increase your risk.
BYD is about waiting for a breakout level, while Xiaomi requires upfront management of product costs. The two shouldn’t be approached with the same strategy.
Tencent $TENCENT (00700.HK)$ : The hardest part isn't the direction, but that call warrants are generally too far out-of-the-money
Tencent is currently trading around HK$471.8, with near-term resistance at HK$474 and HK$481.8, and support levels at HK$466.4 and HK$455.4.
Tencent's price action isn't actually weak, but some existing call warrants have strike prices above HK$525—more than 10% above the current share price.
These products may offer apparent leverage of 7x to 8x, but the issue is that even if the underlying stock rises by a few percentage points, the warrant may not immediately become sensitive.
If Tencent rises from HK$472 to HK$480, the direction is correct, but calls with strike prices above HK$525 may not fully reflect the gain you anticipate.
Conversely, bull certificates with knock-in prices near HK$430 are about 9% below the current price and offer effective leverage of around 9x, making their directional response more direct.
Of course, bull certificates carry mandatory knock-in risk; however, based on their terms, the knock-in price is below the second support level of HK$455.4, providing some buffer.
Therefore, at Tencent's current level, the key question isn't just 'Are you bullish or bearish?' but rather:
– Do you expect a breakout above HK$481.8, or only a rebound up to resistance?
– Can you tolerate the underlying stock first retesting HK$455?
Do you prefer products with direct price sensitivity, or would you rather avoid those with a recall mechanism?
Tencent will be covered in a separate dedicated post later, focusing specifically on the practical differences among call warrants, put warrants, bull certificates, and bear certificates.
Overall structured warrants strategy for today
If today’s market were to be summarized in one sentence:
The index remains relatively strong, but individual stocks and products have already started diverging.
The Hang Seng Index is approaching the 26,000 level—chasing bull certificates using the same strategy as during the low-point rebound is no longer appropriate. Banking stocks are all showing strength, yet it’s crucial to distinguish between product structures of CCB, ICBC, and HSBC. BYD and Xiaomi are moving in similar directions, but Xiaomi carries a noticeably higher implied volatility cost. Tencent may seem the most familiar, yet it’s actually the easiest to misselect due to call warrants with strike prices set too far out-of-the-money.
The next four posts will address the following separately:
Hong Kong Structured Warrants FocusWe’ll compare CCB, ICBC, and HSBC to assess which is better suited for chasing breakouts and which is more appropriate for waiting for pullbacks within the same sector.
Hang Seng Index Special FeatureWill focus on the knock-in distances of bull and bear warrants, particularly bull warrants at 25,210 points and bear warrants at 26,500 points—whether this represents a high-leverage opportunity or if the safety margin has become too thin.
Two-stock comparisonWill compare BYD and Xiaomi—not focusing on stock price movements, but rather on implied volatility, leverage, and knock-in distances—to illustrate why, even when both are equally bullish, the choice of instruments can be entirely different.
Single-stock articleWill focus on Tencent, breaking down call warrants with strike prices above HK$525, bull warrants with a knock-in price of HK$430, and bear warrants between HK$500 and HK$510—explaining how to use them under different market scenarios.
The compiled 'Warrants & Bull/Bear Certificate Product Overview' now compares call/put warrants and bull/bear certificates for the Hang Seng Index, Hang Seng Tech Index, and multiple spotlight stocks, including strike prices, effective gearing, implied volatility, premium, knock-in distance, trading volume, and open interest data.
Investors interested in reviewing individual product terms can download the 'Warrants & Bull/Bear Certificate Product Overview,' starting by assessing market direction, support/resistance levels, and product proximity before deciding which instrument best fits their trading style.
Which stock’s warrant terms would you most like us to analyze recently? Tencent, bank stocks, or BYD and Xiaomi?
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
Comments (2)
to post a comment
4