Options & Warrants Are Good, But Only When You Can Really Manage Them Well

[su_note note_color=”#efef5a”]This is all from my losing experience only, and I am no expert. Sorry for my bad English as well.[/su_note]

In Hong Kong market, one of the most popular derivative products among retail traders are Warrants & CBBC. Index Future is the next, and Options comes third, but it is somehow regarded as more sophisticated. Stock Options are getting promoted but it still need more time to grow. Missing Stock Futures? Yes, these markets have thin volume.


I have been trading the first four types of derivative products, with the experience:

Warrants > CBBC > Futures > Options


Index & Stock Options

Options are often promoted by brokers and sell-side insiders as a income generating instrument. I see that there are many brokers in the US offering Stock Option Trading, but in Hong Kong, the stock option markets (US-style settlement) are still in its early stage as people tend to trade the European style Index Options.

I have tried only a few strategies where I feel more comfortable with spreads. However, most of the time I end of with long call or long put..(yea, that’s how I busted the accounts)

I will write more about my losing experience on index options later on.


I have been told that the Hang Seng Index and its futures are difficult to trade. I am usually washed-out with over-leveraged & inadequate capital, but that’s another story.

Warrants & CBBC are rigged.

This is because both Warrants & CBBC are retail products. The underwriter has to make profit from it and so, the premium is much higher than trading Options alone. More importantly, we traders can only long-call or long-put the handicapped product.


What’s good about Options, Warrants and CBBC

Leverage. It must be the huge maximum leverage these products can give us.

What’s bad about Options, Warrants and CBBC

The Time Decay. As a loser, I am sad to tell you that I am not capable of managing time decay.

I am the type of person that is too stubborn about my view, especially when the direction is SLOWLY with me.

China Life 2628.HK back in 2011

I remember I bought a Warrant for 2628.HK with around 2 or 3 months expiry in early September, 2011. It did move with my setup, and I didn’t realize the profit in October (Mistake? It didn’t reach my planned profit taking zone yet) and the warrant went almost worthless.

I don’t remember if I have sold it worthlessly or let it expired.  I know these products are for short-runners but yes, I know that I am too stubborn to trade.

This is not the only losing warrant/cbbc trade I have made and I am still trying to manage my greed, in order to stay away from this beast.

On the other hand, this trade can be more successful if I:

  • Buy with cash
    • I was too greedy by that time and looking for a leveraged profit.
  • Buy with margin
    • I did not get enough experience with margin trading by that time.
  • Short Put option
    • IMO, this is one tricky point of Options: Why would I collect some little premium from writing the puts while I have a bullish view on the underlying?


If you are to trade options or its close relatives, make sure you are able to handle these:

  1. direction of the underlying
  2. time decay
  3. leverage