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Troubled week for HSI futures with 4-day decline

Warrants Commentary (13 to 17 Aug)

The volatile Hang Seng Index (HSI) futures suffered a bad start last week, parting with gains from the previous week.  In line with US markets, the HSI futures plunged 346 points or 1.2% on Monday, with the decline continuing until Thursday, where the futures almost closed below the 27,000 level.  The huge decline since June 2018 has pushed many call warrants over the HSI to be far out-of-the-money.  For instance, call warrants HSI-C3D and HSI-C3E, which are both expiring this month, are currently worthless and are very likely to expire so.  In contrast, put warrants HSI-H4E and HSI-H4F have gained substantially over the past few months, with both warrants currently trading at RM1.01 and RM1.61, respectively.

Over the past week, investors have been aggressively buying the call warrants over HSI, in anticipation of a potential rebound in the futures.  As at Friday, 5 HSI call warrants are fully sold out, namely HSI-C3I, HSI-C3J, HSI-C3K, HSI-C3M and HSI-C3N, despite the futures rebounding 0.3% to 27,136 on Friday.  Most of the remaining call warrants are approaching the sold out limit or have very low delta, signaling a high possibility of the warrants expiring worthless, unless the HSI rebounds.  Buying a warrant that is already sold out or on a wide spread can be very costly as investors may purchase it at a price inflated from the market-maker’s fair bid and offer levels.  Hence, it is very important for investors to keep an eye on the sold-out updates and the live matrix.

In single stock warrants, warrants over AirAsia Group (AirAsia) were actively traded as the share price  rebounded on Wednesday after 5 consecutive days of decline.  The share price enjoyed its strongest gain on Friday as it rose 3.3% to end the week at RM3.49.  Among the many warrants over AirAsia, AIRASIA-C61 was the most active for the week, gaining as much as 19.1% on Friday to close at RM0.125.

Other notable warrants for the week include UNISEM-C7, which captured investors’ attention as the underlying share price rose every day last week.  Despite strong 0.8% and 1.9% gains on Monday and Tuesday respectively, UNISEM-C7 closed unchanged at RM0.220, and only started moving up for the rest of the week.  Week-on-week, the underlying gained 12.3% to close at RM3.01, whereas UNISEM-C7 gained 27.3% to close at RM0.280.


Top 5 warrants by traded value:

Warrant name Value
Issuer Exercise level Expiry date
HSI-H4I 85.0 Macquarie 27,800 30 Oct 2018
HSI-C3S 56.2 Macquarie 30,400 27 Feb 2019
HSI-H4O 64.6 Macquarie 25,400 30 Jan 2019
HSI-H4S 34.3 Macquarie 26,600 27 Feb 2019
HSI-H4P 32.7 Macquarie 26,400 30 Jan 2019

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Provided for Malaysian residents information only. It is not an offer or recommendation to trade and is not research material. Past performance is not indicative of future performance. You should make your own assessment and seek professional advice.

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