HK Warrants Note | Hang Seng Index falls below 25,000; amid stock divergence, product terms matter more than market direction

Today’s focus in the Hong Kong market begins with the Hang Seng Index.

The Hang Seng Index closed at 24,892.66, down 0.95%. It rose to as high as 25,040 early in the session but ultimately failed to hold above the 25,000 level, with a low of 24,802. Technically, the immediate support to watch in the short term is whether the index can hold above 24,800; resistance remains between 25,000 and 25,050.

Regarding bull and bear warrant strategies, the key reminder today is:The index remains range-bound, so knock-in distance should take priority over apparent leverage.

If bullish on the Hang Seng Index rebounding after holding 24,800, near-the-money bull warrants can enhance short-term sensitivity—but if the index drops several hundred points again, the risk of knock-in rises sharply. If one expects the index to consolidate first before rebounding, bull warrants with a wider knock-in buffer, though offering lower leverage, provide a more reasonable positioning strategy.

The same logic applies to bearish positions. If the Hang Seng Index confirms a break below 24,800, bear warrants will align better with the downward momentum; however, chasing high-leverage bear warrants near the 25,000 level carries the risk of a sudden rebound toward 25,300–25,500.

So, the Hang Seng Index today isn’t directionless—it simply hasn’t fully broken out of its range yet. For derivative investors, the key question isn’t whether it’s a bull or bear market, but whether the product they’ve chosen can withstand normal market volatility.

Regarding individual stocks, divergence was very pronounced today.

On one side, PetroChina and CNOOC continued strengthening, with their share prices approaching the upper Bollinger Bands; on the other, Xiaomi, Alibaba, and BYD started pulling back, and NetEase even plunged 7.39% in a single day.

On the surface, it may just appear as a few stocks rising and a few falling, but in the derivative market, what truly deserves attention is:Similar underlying stock trends do not necessarily mean the same warrant terms are suitable.

Although both PetroChina and CNOOC showed strength, their derivative open interest patterns differed.

PetroChina’s call open interest has been rising consecutively, suggesting the market is continuing to chase the uptrend; CNOOC, meanwhile, saw reductions in both bull warrant and some derivative positions, indicating that some investors are gradually exiting after the stock’s rise.

For investors who remain bullish on these two oil stocks: with PetroChina, compare slightly in-the-money call warrants against bull warrants for leverage; with CNOOC, exercise greater caution against buying excessively out-of-the-money products at technical highs. If the underlying stock merely trades sideways at elevated levels, out-of-the-money call warrants may not effectively track upward moves.

Xiaomi, Alibaba, and BYD: medium-term gains remain intact, but short-term momentum is starting to weaken.

These three stocks share a common trait: their 20-day performance remains relatively strong, but they have started to retrace over the past two days.

The most common mistake at this point is seeing that the medium-term uptrend is still intact and immediately opting for high-leverage bull certificates to bet on a rebound.

However, both bull and bear warrants for Xiaomi have seen increased open interest, the heavy concentration zone of Alibaba's bull warrants has moved closer to the current price, and open interest in BYD's bear warrants has been rising consecutively. These are not straightforward bullish or bearish signals, but rather reflect growing market divergence.

If you remain bullish, product selection should prioritize:

– Whether the knock-out price can withstand the underlying stock testing its short-term support again;

– Whether the call warrants are excessively out-of-the-money;

– Whether the delta is sufficient to capture minor rebounds in the underlying stock;

– Whether implied volatility and premium have already become elevated.

In other words, during pullbacks, buying a high-leverage product does not necessarily improve your odds—it sometimes just reduces your margin for error.

NetEase: After a sharp drop, betting on a rebound—beware of buying 'seemingly cheap' out-of-the-money call warrants

NetEase dropped 7.39% today, with its short-term technical structure clearly weakening.

When a stock plunges sharply, many investors instinctively try to bet on a rebound. However, if a call warrant is deeply out-of-the-money, even a few percentage points of rebound in the underlying stock may not yield the expected response from the product.

Moreover, implied volatility tends to be elevated after a sharp drop. Even if the underlying stock recovers afterward, a concurrent decline in implied volatility could offset part of the gain.

Therefore, for NetEase, if betting on a rebound, call warrants that are closer to at-the-money and have higher delta are generally easier to manage. Conversely, if bearish on continued weakness, caution is needed against chasing high-leverage bear warrants or put warrants after a single-day steep drop, as technical rebounds alone could cause significant price swings in these products.

Today’s market can be broadly divided into four categories:

Hang Seng Index:

Still trading within the 24,800–25,050 range: For bull/bear warrants, first assess the distance to knock-out levels, then consider leverage.

Strong performers approaching technical resistance:

PetroChina and CNOOC. When chasing upward momentum, choose near-the-money terms—avoid solely pursuing deep out-of-the-money, high-leverage warrants.

Remaining strong on a medium-term basis but undergoing short-term pullbacks:

Xiaomi, Alibaba, and BYD. Bull warrants should allow room for normal adjustments.

Short-term structure clearly impaired:

NetEase. For bounce trades, pay attention to moneyness and implied volatility; for bearish positions, beware of sharp rebounds after steep declines.

Today's 'Warrants and CBBC Product Overview' has compiled representative call warrants, put warrants, bull certificates, and bear certificates for the Hang Seng Index, Hang Seng Tech Index, and several key stocks, including strike prices, moneyness, leverage, implied volatility, delta, premium, call price, and distance to call price.

Overview of Warrants and CBBCs

For investors who already have a directional view, the most practical use of the product overview is to help confirm:

Whether the product you selected truly aligns with your expected price movement, holding period, and tolerance for adverse volatility.

Getting the direction of the Hang Seng Index or underlying stock right is only the first step; choosing the wrong terms can still lead to vastly different outcomes.

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