INDEX ETFS, OPTIONS AND FUTURES - MYTHS VS. FACTS
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Supported by: INDEX ETFS, OPTIONS AND FUTURES – MYTHS VS. FACTS Presenters: Alan Lok, CFA, Director, Ethics Education and Professional Standards, Asia-Pacific, CFA Institute Alexander Siu, CFA, Co-Head, Equities Product Development, Markets, Hong Kong Exchanges and Clearings Limited Ethan Chan, CFA, Fund Manager, Indexing, Hang Seng Investment Management Limited Gary Chiu, Senior Research Manager, Hang Seng Indexes Company
PRESENTATION GARY CHIU Senior Research Manager, Hang Seng Indexes Company
PRESENTATION ALEXANDER SIU, CFA Co-Head, Equities Product Development, Markets, Hong Kong Exchanges and Clearings Limited
Index ETFs, Options and Futures – Myths vs. Facts Alexander Siu Co-Head of Equities Product Development, Markets Hong Kong Exchanges and Clearings Limited 28 Jan 2021
Comparison of Index Futures and Options
Index Futures Index Options (Long position) Index Options (Short position)
Right / Obligation Obligation Right Obligation
Payout Linear payout Non-linear Fixed
Risk parameters Delta Delta/Gamma/Vega/Theta/Rho
Potential profit / loss Unlimited upside / downside Unlimited upside and limited loss Limited upside and unlimted loss
Capital requirement Post Margin Pay Premium Post Margin
Directional exposure Directional exposure (Indirect directional exposure)
Applications Cash equitization Gamma scalping Long Short Volatitliy
Cash / Futures arbitrage Volatility Earning time decay
• Less capital commitment by
Benefits over cash • Leverage trading • Generate yield under low
posting margin
alternatives • Limited loss volatility market
• Leverage trading
2
Highlight of flagship and new index products on HKEX
Average Daily Volume (ADV) of flagship derivatives trading on HKEX* • Tremendous growth of ADV
260,000 of HSI Futures and HSCEI
Futures and Options in past
210,000
10 years
160,000 • Highest ADV in 2018
• 78% , 138% and 442% surge
110,000
in ADV of HSI Futures,
60,000 HSCEI Futures and HSCEI
Options respectively when
10,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 compared to 2011
HSI Futures ADV HSCEI Futures ADV HSI Options ADV HSCEI Options ADV
ADV and Open Interest (OI) of HSTECH Futures^ • HKEX launched Hang Seng
TECH Index (HSTECH)
7000
6000 Futures on 23 Nov 2020
5000 • Weekly ADV doubled since
4000
launch
3000
2000 • OI grew from 1000 level to
1000 6000 level
0
23 - 27 Nov 30 Nov - 4 7 - 11 Dec 14 - 18 Dec 21 - 24 Dec 28 - 31 Dec 4 - 8 Jan 11 - 15 Jan • HSTECH Options was
2020 Dec 2020 2020 2020 2020 2020 2021 2021 launched on 18 Jan 2021
3
OI ADV Data source: HKEX *As at 31 Dec 2020 ^As at 15 Jan 2021Disclaimer
The information contained in this document is for general informational purposes only and does not constitute an offer, solicitation, invitation or recommendation to buy or sell any futures and options contracts or
other products or to provide any investment advice or service of any kind. This document is not directed at, and is not intended for distribution to or use by, any person or entity in any jurisdiction or country
where such distribution or use would be contrary to law or regulation or which would subject Hong Kong Exchanges and Clearing Limited, Hong Kong Futures Exchange Limited (“HKFE”) (together, the “Entities”,
each an “Entity”), or any of their affiliates, or any of the companies that they operate, to any registration requirement within such jurisdiction or country. No section or clause in this document may be regarded
as creating any obligation on the part of any of the Entities. Rights and obligations with regard to the trading, clearing and settlement of any futures and options contracts effected on HKFE shall depend solely on
the applicable rules of HKFE and the relevant clearing house, as well as the applicable laws, rules and regulations of Hong Kong.
Although the information contained in this document is obtained or compiled from sources believed to be reliable, neither of the Entities guarantees the accuracy, validity, timeliness or completeness of the information
or data for any particular purpose, and the Entities and the companies that they operate shall not accept any responsibility for, or be liable for, errors, omissions or other inaccuracies in the information or for the
consequences thereof. The information set out in this document is provided on an “as is” and “as available” basis and may be amended or changed. It is not a substitute for professional advice which takes account of
your specific circumstances and nothing in this document constitutes legal advice. Neither of the Entities shall be responsible or liable for any loss or damage, directly or indirectly, arising from the use of or reliance
upon any information provided in this document.
4Supported by:
PANEL DISCUSSION
INDEX ETFS, OPTIONS AND FUTURES – MYTHS VS. FACTS
Alan Lok, CFA, Alexander Siu, CFA, Ethan Chan, CFA, Gary Chiu,
Director, Co-Head, Fund Manager, Senior Research Manager,
Ethics Education and Equities Product Indexing, Hang Seng Indexes
Professional Standards, Development, Markets, Hang Seng Investment Company
Asia-Pacific, Hong Kong Exchanges and Management Limited
CFA Institute Clearings LimitedTHANK YOU
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