Stock Options
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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      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.

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 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
POEMS 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
Mobile 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.
Professional 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.
Professional 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.
option strategy Weekly analysis – option commentaries
Weekly option focus and analysis for deploying the investment strategies
excelrt 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/
查詢請電 股票期權部 22776622 或 電郵至 option@phillip.com.hk 聯絡我們


 

本公司保留更改有關條款及細則之權利,恕不另行通知。如有任何爭議, 本公司擁有最終和不可推翻的決定權。

投資涉及風險,請參閱本公司www.poems.com.hk網頁內的〔風險披露聲明〕。

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 :
  1. Bull/bear,call/put spread
  2. Straddle/strangle
  3. 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

網易 9999(短倉期權)

Wednesday, June 17, 2020 Views3179

網易,相信大家最近多多少少都會聽到類似的消息。網易在六月正式在香港上市,成為了大家的關注所在。究竟是什麼原因這次上市的熱度會如此高漲呢?大家都會覺得網易跟騰訊(00700)是頗相似的,無論是業務還是規模,都是有可比較的地方。如果真要比較,網易跟騰訊兩家企業都把很大的重心放在了遊戲開發上面,但其實很多人都不知道,在這一塊上面,反而網易的規模還比較大。

 

在遊戲方面,這一板塊的收入佔了全公司收入的8成左右,而騰訊只有5成左右。大家都知道在疫情當中游戲開發商特別是手游這一板塊都有受惠,所以可以想像網易在這一清期間肯定也是有不少的增長。

 

雖然網易在香港剛上不久,但我們依然可以用美國那邊的數據做一些對比。如果我們看網易第一季度的數據,淨收入為171億,相對2019年第一季度又18.3%的增長,其中線上游戲的淨收為135億,相對2019年第一季度又14.1%的增長。在其他的領域上面都均有增長。

 

2019年的數據更是不用置疑,淨利潤同比增長大概245%,淨營收為592.41億,同比增長15.75%。我們繼續看資產收益率,在2019年網易的資產收益率達19.11%,跟2018年(7.45%)和2017年(15.27%)都有明顯的對比。在第一季度,更是有20.89%。可以看出,公司的穩定性與發展都是值得我們去期待的。

 

但還有一點很重要的是,網易跟我們的一哥騰訊非常相似,所以一定會有一些對比。最主要的對比是雖然規模業務都有相似的地方,但網易就是便宜。 2019年騰訊的市盈率大概42倍,而網易也就大概個22倍。所以某程度來說,網易可以是便宜一半!如果買不起騰訊的,網易有可能是更好的投資選擇。

 

期權策略

上市價格:123

現時價格:127.9

最高價:129

 

目前股價從上市到現在,已經進入平穩的狀態。我們不會期待股價會有大幅的波動。另外我們可以看到美國那邊股價從港股上市那時的升幅後,已經徘徊在一個穩定的地步。六月頭的時間也只是有低幅度的波動。

 

在這樣的一個階段,我們可以怎麼做交易呢。

 

其實很多人都不知道,當網易在香港成功上市後,也很快就推出了該股票的期權買賣。所以當你不知道應該做怎麼樣的準備時,期權可能會更加適合您。從種種因素下看,我們可以推測目前股價不會有多大的上下升幅。市場也是對於該公司抱有正面的態度,我們也不會推測近期會有大幅度的下滑。

 

目前情况下

 

  • 投資者可以選擇賣出(短倉)認沽期權。如果價格升穿行使價,您可以照樣收取期權金,而也不會被行使。
  •  

1. 賣出6月認沽期權125:收取期權金2.6

2. 如價格不跌穿125,獲利會是2.6*500=1300

3. 如跌穿125,就有可能需要接貨,會有某程度的損失

當然,您可以選擇更加接近價內的行使價,這樣收取的期權金也會案比例增加,但如價格有向下波動的情況,有更大的機會要接貨。

(如下图)

Short Option Strategy

另一种情况底下

 

  • 投資者可以選擇賣出(短倉)認購期權。如果價格跌穿行使價,您可以照樣收取期權金,而也不會被行使。

例子

1. 賣出6月認購期權130:收取期權金2.89

2. 如價格不升穿130,獲利會是2.6*500=1445

3. 如跌穿130,就有可能會被行使,會有某程度的損失

很多人都會選擇這樣的策略是因為他們在招股期間又被分配到,他們就可以在賣出認購期權中選擇“備兌”。而在輝立選擇備兌開倉時可享免佣。

(如上图)

 

無論是從哪個方向出發,我們目前的看法是股價暫時會是出於一個平穩試水溫的狀態。因此短倉期權可能是一個好的選擇,可以先收取期權金。

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:

  1. Open a margin account or cash account (Custodian) in order to open a stock options account.
    For more details please click here
  2. 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. $100)

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.

  1. Stop allowing clients to open positions.
  2. Closing of the clients’ position.
  3. 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.

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

Related Links

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

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.

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.

 

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.

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
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Stock Options Department
Tel : (852) 2277 6622
Email : option@phillip.com.hk

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