Promotion materials are in Chinese only, please contact (852) 2277 6611 for any enquiry.

最新推廣(所有交易不設平台費)

Concept of option

Options are a right with deadline. The buyer pays an option premium for the rights granted by the contract. The seller earns the premium for the obligation to honour the contracts.

Stock options’buyer and seller:

Investors can choose LONG (buy) or SHORT (sell) stock options

Buyer(holder)-- have rights but no obligation to exercise on or before the expiration date.
Seller(writer)---are obliged to honour the contracts if the holders choose to exercise.

Types of Options:

There are two types of stock options:

(Call Option)

short call

Example: Stock A (October) at $90 strike price
Holder	has rights to buy the stock at $90 (strike price) on or before October	Expect rising of stock price
Writer	is obliged to sell the stock at $90 if the holder exercises the contract	Expect not rising of stock price

Put Option

Long Put Short Put

Example: Stock B (October) at $20 strike price
Holder	has rights to sell the stock at $20 (strike price) on or before October	Expect falling of stock price
Writer	is obliged to buy the stock at $20 if the holder exercises the contract	Expect not falling of stock price

Stock option is a contract entered by and shared between two parties, a buyer and a seller. Everyone can long (buy) or short (sell) the contract. The buyer has the right, but not the obligation, to buy or sell the underlying asset at predetermined price on or by a predetermined expiry date. On the other hand, the seller has the obligation to buy or sell the underlying asset at predetermined price on or by a predetermined expiry date if the buyer exercises the contract. When you long an option, the purchase price is called the premium. If you short, you receive the premium.

Exercise / Assignment

The owner of an option contract has the right to exercise it, trading the underlying asset at the strike price, called “Exercise”. An option of a seller is exercised by owner, called “Assignment”.

Open a position / Close a position

An open position means that the trader holds a certain quantity of a given financial instrument. In order to close a position, the position must be bought or sold back to the market. So to close a long position, traders would sell the asset back to the market. And to close a short position, the trader would buy the asset. If you bought an option, you must use a "sell to close" order, which is akin to owning a stock that you then sell back into the market, in order to close out the position.

Characteristics of Stock Options

Flexible investment strategy

Stock options can assist investors to make profits in bullish, bearish or stagnant markets.

Hedging with options

Investors can restrict the downside while enjoying the full upside by hedging the underlying assets with options.

Leverage the return

Stock option is derivative, which leverages the investment return.

Low Transaction Fee

The transaction fee for stock option is cheaper than that for the same amount of stocks. Besides, stamp duty is exempted for stock option.

Weekly Stock Option introduction

Launch Date: 4 November 2024 Monday

Product Offering: 10 selected single stock classes

HSBC Holdings Plc. (5)
Hong Kong Exchanges and Clearing Limited (388)
Tencent Holdings Limited (700)
Kuaishou Technology (1024)
BYD Company Limited (1211)
Ping An Insurance (Group) Company of China, Ltd. (2318)
Meituan (3690)
JD.com, Inc. (9618)
Baidu, Inc. (9888)
Alibaba Group Holding Ltd. (9988)

Trading and Expiry:

Weekly options will be available for trading from Monday and expire on the following week’s Friday. If Friday is a public holiday, the expiry will occur on the preceding business day.
Contracts will be listed for both the current week (spot week) and the next week, with no overlaps on expiry days with monthly contracts.

Contract Codes:

Contract Code Example	HEX380.00H4W23
HEX	HKATS underlying code (HKEX in example)
380	The contract’s strike price (HK$380.0 in example)
H	The option contract month code (call option in August in example)
4	The contract year (4 indicates 2024 in example)
W	Indicates a weekly contract
23	The date of expiry (23rd day of August 2024 in example)

Stock Option

Phillip is one of the earliest option brokers in Hong Kong, engaging in stock option business over ten years, even the first broker to develop the electronic trading platform in Hong Kong. Nowadays, Phillip is still the market marker for the stock option of Tracker Fund (2800), responsible to offer a certain amount of quotes in order to maintain the liquidity in the market. Through the experience of the development in stock option business, our experienced option dealers can assist clients to trade and answer enquires from clients. Moreover, Phillip developed an electronic trading platform for stock option – OATS, which provides a comprehensive service of online trading and real time quote. Besides, Phillip offers a lot of stock option courses, taught by our senior dealers, for clients to learn about our trading platform and option analysis so as to grab the investment opportunities.

Options Advanced Trading System (OATS) is our self-developed electronic trading platform. OATS provide a comprehensive coverage of online trading and real-time option price quotes. Our experienced dealer offer monthly options courses regarding OATS ‘s trading system and other options knowledges for our clients to capture market opportunities.

Options Advanced Trading System OATS

OATS.NET electronic stock options trading platform is a platform our self-developed platform that offers comprehensive online business transactions, real-time quotes, options price quotations and order price alternation functions. Action now and apply immediately to experience our professional online stock option trading services.

Instant Price Quote Service
Contracts Transactions Record
Profit & Loss
Options position view
Instant Dow Jones News
Options Delta and Implied Volatility information

Phillip offer online options trading services to our clients. Clients can trade options online via our POEMS system without additional installation of any software program once clients applied the online trading platform.

Conduct options price quote directly to market makers
Direct access to the HKEx’s trading system
Free options price quote – 5 price depth and quantities

We offer Mobile Apps for options trading exclusively, no matter where you are, where you in. You can also smartphone for trading anytime, anywhere.

Flexible and comfortable, no matter where you are, where you in, you can also use the smartphone to trade anytime, anywhere.
Easy and user friendly, trades are easier than ever before. Now, even if you have been outside, you can use mobile phones to obtain information to trade.
Safe and reliable, - using sophisticated wireless encryption technology, POEMS Mobile to ensure your transactions in a safe and secure environment.

Phillip Securities (HK) Ltd. is one of the earliest stock options brokers, we engaged in options business for more than a decade. Our experienced dealers/representatives can understand the clients’ needs and provide related customer services.

	Lectures and Workshops – Option group teaching
	Phillip offers several stock option lectures and workshops to our investors in which investors can learn about the basic knowledge of option and the related investment strategies, such as combination of options and stock and practical tips for trading options.

	Weekly analysis – option commentaries
	Weekly option focus and analysis for deploying the investment strategies

	Excel RealTime automatic trading system, 30-Day free trial
	Excel RealTime quotation and trading system, accompanied with Microsoft ® Excel, provides a lot of functions to investors, such as risk data calculation, real time data quotation, automatic trading, etc. For details, please visit http://www.poems.com.hk/zh-hk/phillip-apps/excel-realtime/ http://www.poems.com.hk/zh-hk/phillip-apps/excel-realtime/

Features

Margin requirement was lower and calculated based on hedging method. Better fund utilization for different trading strategies can be achieved.
Actual market risk can be reflected from the hedging profile
Margin requirements real time update on OATS
Free

3 Popular hedging strategies

『Hedge account』 is for sophisticated investors for setting different trading portfolios’ combination. 3 popular hedging strategies includes :

Bull/bear,call/put spread
Straddle/strangle
Butterfly/condor

Example

Bull put spread

Short #1, $90.00, September put option @$2
Long #1 $85.00, September put option @$0.75
Premium received : $2 - $ 0.75 = $1.25
Potential total loss : $90 - $85 -$1.25 = $3.75
Normal margin = $5,400
Hedge account margin = $2,470

Account opening requirements

Monthly options commission is $1,000 Or Net equity > $100,000(Net equity requirement is as low as $50,000 in the promotion period*)

*Promotion is valid until 31/12/2019

Account Opening

Fill in the [Options Hedge A/C Form] and return with signed original copy to Stock Option Department.

Click here to download

Author

股票期權部 (Options)
輝立証券
Phone:
852 2277 6622
Email:
option@phillip.com.hk

Weekly Stock Option introduction

Friday, November 1, 2024

12907

Weekly Stock Option introduction

Launch Date: 4 November 2024 Monday

Product Offering: 10 selected single stock classes

HSBC Holdings Plc. (5)
Hong Kong Exchanges and Clearing Limited (388)
Tencent Holdings Limited (700)
Kuaishou Technology (1024)
BYD Company Limited (1211)
Ping An Insurance (Group) Company of China, Ltd. (2318)
Meituan (3690)
JD.com, Inc. (9618)
Baidu, Inc. (9888)
Alibaba Group Holding Ltd. (9988)

Trading and Expiry:

Contract Codes:

Contract Code Example	HEX380.00H4W23
HEX	HKATS underlying code (HKEX in example)
380	The contract’s strike price (HK$380.0 in example)
H	The option contract month code (call option in August in example)
4	The contract year (4 indicates 2024 in example)
W	Indicates a weekly contract
23	The date of expiry (23rd day of August 2024 in example)

Risk disclosure statement and disclaimers of Trading Futures and Options
The risk of loss in trading futures contracts or options is substantial. In some circumstances, you may sustain losses in excess of your initial margin funds. Placing contingent orders, such as “stop-loss” or: stop-limit” orders, will not necessarily avoid loss. Market conditions may make it impossible to execute such orders. There is a possibility that any stop-loss order may be cancelled by a futures exchange due to various reasons including where orders are ‘out of price limits’ during a fluctuating market. You should closely monitor your orders, as we may be unable to contact you in the event of cancellation. You may be called upon at short notice to deposit additional margin funds. If the required funds are not provided within the prescribed time, your position may be liquidated. You will remain liable for any resulting deficit in your account. You should therefore study and understand futures contracts and options before you trade and carefully consider whether such trading is suitable in the light of your own financial position and investment objectives. If you trade options you should inform yourself of exercise and expiration procedures and your rights and obligations upon exercise or expiry. You should study carefully the Disclosure Statements of Local Futures on our website

Account Opening

To open a stock options account, clients should:

Open a margin account or cash account (Custodian) in order to open a stock options account.
For more details please click here；
Enable the POEMS (online trading platform) in order to trade stock options online

Margin Requirement

Clients can receive a premium when they short call or put. When doing so, they must deposit enough money to fulfill the margin requirement.

There are different margin requirements for option contracts with different strike price and expiry date. The margin requirement can be found out from the HKEx web site Client Margin Estimate Reference Table. In case of conflict between the HKEx web site and the option statement, option statements shall prevail.

When there is an intra-day margin call, it is necessary for clients to deposit sufficient money into their options account within the time specified.

For Short positions, kindly remind about the contracts' notional value (Stock value of short positions if contracts is being assigned). Additional margin requirements may require for large short position, clients may need to prepare additional cash as margin requirements for risk control. For details, please contact us.

Reporting Levels and Positions Limits

Where Clients hold open position in Stock Options contracts exceeding a certain level, our Company shall report such holding to the Exchange. Additionally, Clients may not hold positions that exceed the position limits.

For specifics regarding reporting levels and position limits, please refer to the link below:

https://www.hkex.com.hk/Services/Trading/Derivatives/Overview/Trading-Mechanism/Large-Open-Positions-and-Position-Limits?sc_lang=zh-HK#excess

Other fees

Commission

premium x number of shares x 0.25% (min. $50)

HKEx trading tariff

Tier 1: $3

Tier 2: $1

Tier 3: $0.5

Example:

Long 5 lots (2000 shares), HSBC, strike $90, November call, premium $0.7

Premium = 0.7 x 2,000 = $1400

Commission = $100

Trading tariff =5 x $3=$15

Total cost =$1400+$100+$15=$1515

Settlement

The settlement day for stock options is T+1: clients must deposit sufficient margin on day T. Otherwise, the following action could be done to clients without notification.

Stop allowing clients to open positions.
Closing of the clients’ position.
Buying or selling the underlying stock for option assignment.

Clients have to transfer their stocks to their option account for covered call before 3:30 p.m. on day T.

Remarks : Margin requirements varies according to the shares price changes, final margin refer to the day-end stock option statement

Exercise and Assign

If clients would like to exercise their stock options, then please contact Stock Options Department at (852) 2277 6622 before 4:30 pm.

If contracts are exercised / assigned from selling stocks which clients do not own, clients are required to buyback the stock by T+1.

Promotion materials are in Chinese only, please contact (852) 2277 6611 for any enquiry.

Myth 1: Short Options have infinite risks ?

Answer: In general, short options are associated with huge or infinite risks. This concept is theoretically correct as the prices of the options’ underlying shares may fall or rise to infinite zero. However, this may not be realistic as there were a hypothesis---You do not make any cut loss action.

Disregarding investors can choose stock options of some blue chips or state-owned enterprises such as PetroChina or HSBC etc. Even if the stock price fell to zero, the stock you are holding is still worthless. But will you wait until the stock dropped to zero before the loss cutting it?

Because of the options’ leverage effect, most traders will abuse the leverage effects and expose themselves for huge risks. In fact, if traded options with proper manner and proper risk management, strictly conduct loss cutting procedures, options is not as general as investors imagined danger.

Myth 2: Short options being assigned need to force buy-in or sell the underlying shares. But I do not have sufficient fund associated.

Answer: Most retail investors may not be able to have 100% of funds at any time ready to buy the underlying shares (Short Put assigned for force buy-in shares at the exercise price)，but investorscan sell the shares on the day being short put assigned, and the loss is just the gap in between the selling price and exercise price.

Example:Suppose HSBC price at $119, Investors A short Put current month $120 x 10 lots being short put assigned. Investors A can sell out HSBC at market price $119 after the short put assigned brought of HSBC at $120 x 10 Lots,

Actual losses: $ 120- $ 119 = $ 1 X 10 X 400 = $ 4,000.
A just need to prepare $ 4,000, instead of buying 10 hands HSBC's $ 480,000.

Risk associated is the shares prices drop rapidly after the short put assigned.Investors have to set-up cut-loss prices and apply risk control measurements.

Myth 3: Short options can be assigned anytime and with high risks ?

Answer: In general situation, short options won’t be assigned before the options expired date. Option buyers choose to exercise such options contracts will only get the profit equal to the intrinsic value of the options. If they sell the options in the market usually can achieve higher profits ( the profit comes from the options’ time value). So only a small percentage of the option contracts are assigned in advance. One reminder is : Short call options may be assigned in advance because of the dividends factor. Long options owners may exercise their option contract in advance for dividends collection. Investors have to pay attention to the relationship between the underlying shares’ ex-day and the options.

Myth 4 : Short options need to wait until the contract expiry for premium collection ?

Answer: Options premium can be received once the options were shorted. However, short options need margin deposit, if you have sufficient margin deposit, you can withdraw the option premium anytime.

Myth 5: Short options need to wait until option expiry date for profit realization?

Answer: Most investors misunderstand that options’ profit can only be realized until holding the options till its expiry. However,investors can close position at any time before the option expiry..In general situation, the shorted options’ prices are closed to zero, that means most options premium were earned until options expired. Investors can wait until option contracts expiry Or can close position for profit realization at once.

Option market maker system

Stock Option market is using the market maker system and market makers have the following responsibilities to maintain market liquidity include:

Maintain certain amount of price quote : Bid/Ask
Provide price quote after receiving price quotation request

Trading Highlights

Stock Option is US style option, which can exercise before expiry date
Underlying share settlement (Non-Cash)
Option T+1 trading settlement
The expiry date of each month is on the 2nd last trading day of that month

Stock Option and Warrant

Recently, derivative products have become more popular in Hong Kong. Its trading volume continues to increase and Hong Kong is even the largest derivative market in the world. Today, we will introduce two of those derivative products – stock option and warrant and compare their characteristics and differences between them.

Comparison table:

	Stock Option (股票期權)	Warrant (認股證)
Issuer	HK Stock Exchange	Specific Issuer
Clearing	Guaranteed by the HK Stock Exchange	No
Strategy	Long & Short	Long only
Strike price	Various selections	One strike price designated by Issuer
Expiry Date	Various selections	One expiry date designated by Issuer
Market Maker	More than one	One market maker for each specific warrant

From the table above, it shows that trading stock option is more flexible because stock option has more choices with different expiry dates and strike prices. Stock option is also guaranteed by the HK Stock Exchange.

Example

Refer to an example on 11/12/2018

	Stock Option	Warrant
Contract	HKX 235.00A9	#28002 [JP-HKEX@EC1901B]
Issuer	HKEx	JP
Strike price	HK$235	HK$234.04
Expiry date	1/30/2019	2019-01-25
Price	HK$4.98	HK$0.07
		Conversion unit
		($0.067 x 100 = HK$6.7)
Trading unit	100	10000

*Source: 11/12/2018, #388 HKD$227

Transaction Charges

From the table above, buying a warrant is similar to buying a stock option, but the price of stock option is lower than the price of warrant, so it is better to buy a stock option instead of a warrant.

Stock Option (股票期權)	Warrant (認股証)
1. $10/lot (For Long Open less than 10 lots)	2. Maximum commission is $30000
0.25% of turnover (min $100)

Reminder: transaction charges are subject to relevant terms. For details, please refer to Schedule of Fees and Charges for Services for Stock Option or contact Stock Option department by 2277 6622.

Market Myths
Option market maker system
Trading highlights
Related Links

Myth 1: Short Options have infinite risks ?

Myth 2: Short options being assigned need to force buy-in or sell the underlying shares. But I do not have sufficient fund associated.

Actual losses: $ 120- $ 119 = $ 1 X 10 X 400 = $ 4,000.
A just need to prepare $ 4,000, instead of buying 10 hands HSBC's $ 480,000.

Risk associated is the shares prices drop rapidly after the short put assigned.Investors have to set-up cut-loss prices and apply risk control measurements.

Myth 3: Short options can be assigned anytime and with high risks ?

Myth 4 : Short options need to wait until the contract expiry for premium collection ?

Myth 5: Short options need to wait until option expiry date for profit realization?

Stock Options market is using the market maker system and market makers have the following responsibilities to maintain market liquidity includes:

Maintain certain % of price quote : Bid/Ask
Provide price quote after received price quotation request

Stock Options is US style options, it can exercise before its expire
Underlying shares settlements (Non-Cash)
T+1 trading settlements
每一張股票期權合約代表1手正股股數
Each month’s expiry date is on the 2nd last trading day of each month

Concept of option

Stock options’buyer and seller:

Types of Options:

(Call Option)

Put Option

Exercise / Assignment

Open a position / Close a position

Characteristics of Stock Options

Flexible investment strategy

Hedging with options

Leverage the return

Low Transaction Fee

Launch Date: 4 November 2024 Monday

Product Offering: 10 selected single stock classes

Trading and Expiry:

Contract Codes:

Stock Option

Options Advanced Trading System OATS

Features

3 Popular hedging strategies

Example

Bull put spread

Account opening requirements

Account Opening

Author

Weekly Stock Option introduction

Launch Date: 4 November 2024 Monday

Product Offering: 10 selected single stock classes

Trading and Expiry:

Contract Codes:

Account Opening

Margin Requirement

Reporting Levels and Positions Limits

Other fees

Commission

HKEx trading tariff

Example:

Settlement

Exercise and Assign

Option market maker system

Trading Highlights

Related Links

Stock Option and Warrant

Comparison table:

Example

Transaction Charges

Reminder: transaction charges are subject to relevant terms. For details, please refer to Schedule of Fees and Charges for Services for Stock Option or contact Stock Option department by 2277 6622.

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