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Derivatives are financial instruments which values are based on the prices of underlying securities, commodities or benchmarks. The most popular derivatives are futures and options, which financial institutions and companies use for arbitrage, risk management and trading purposes. Retail investors can also deploy derivatives for protection and yield enhancement.
HSBC Broking offers trading services covering a comprehensive range of futures and options contracts traded on major exchanges around the world. Our team has rich expertise and proven success in helping sophisticated and experienced investors to execute their investment strategies through the use of derivatives.
Futures contracts are derivative instruments. They represent a commitment to buy or sell predefined amounts of underlying assets (e.g. stocks, commodities, currencies etc.) at predetermined price on a specified future date.
Exchange traded futures are standardised futures contracts that are listed in exchanges. HSBC Broking provide services covering major futures exchanges around the world, including the New York Mercantile Exchange (NYMEX), Chicago Mercantile Exchange and the Chicago Board of Trade (CME Group), Intercontinental Exchange (ICE), EUREX and Hong Kong Futures Exchange (HKFE).
Scenario Analysis
Assuming customer buys a contract of Hang Sang Index (HSI) Futures (Oct) at a quote of 23,000. The contract multiplier is HKD50 per index point, and the initial margin and maintenance margin is HKD108,250 and HKD86,600 respectively. Below are examples to illustrate the investment returns basing on different scenarios of HSI futures movement.
| Scenario |
Initial open position (HKD) |
Initial margin (HKD) |
Maintenance margin (HKD) |
HSI Future Movement |
HSI Future at close |
Spread |
Realised profit/ (loss) (HKD) |
Return on investment (HKD) |
|---|---|---|---|---|---|---|---|---|
| 1 |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
108,250 |
86,600 |
No Change |
23,000 |
0 | +0 (+0 x HKD50) |
N/A |
| 2 |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
108,250 |
86,600 |
Favourable |
23,300 |
300 | +15,000 (+300 x HKD50) |
+14% (+15,000 out of 108,250) |
| 3 | 23,000 x HKD50 (contract multiplier) = +1,150,000 |
108,250 |
86,600 |
Unfavourable |
22,700 |
-300 | -15,000 (300 x HKD50) |
-14% (-15,000 out of 108,250) |
| Scenario |
1 |
|---|---|
| Initial open position (HKD) |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
| Initial margin (HKD) |
108,250 |
| Maintenance margin (HKD) |
86,600 |
| HSI Future Movement |
No Change |
| HSI Future at close |
23,000 |
| Spread |
0 |
| Realised profit/ (loss) (HKD) |
+0 (+0 x HKD50) |
| Return on investment (HKD) |
N/A |
| Scenario |
2 |
| Initial open position (HKD) |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
| Initial margin (HKD) |
108,250 |
| Maintenance margin (HKD) |
86,600 |
| HSI Future Movement |
Favourable |
| HSI Future at close |
23,300 |
| Spread |
300 |
| Realised profit/ (loss) (HKD) |
+15,000 (+300 x HKD50) |
| Return on investment (HKD) |
+14% (+15,000 out of 108,250) |
| Scenario |
3 |
| Initial open position (HKD) |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
| Initial margin (HKD) |
108,250 |
| Maintenance margin (HKD) |
86,600 |
| HSI Future Movement |
Unfavourable |
| HSI Future at close |
22,700 |
| Spread |
-300 |
| Realised profit/ (loss) (HKD) |
-15,000 (300 x HKD50) |
| Return on investment (HKD) |
-14% (-15,000 out of 108,250) |
From the above scenario, if the unrealised loss in the contract is equal to or more than HKD21,650 (ie Initial margin minus maintenance margin required), margin call will be triggered1. This can be further translated to a drop of 433 points in HSI Futures as follows.
| Latest HSI Futures |
Spread |
Unrealised loss (HKD) |
Margin Call |
|---|---|---|---|
| 22,567 |
-433 |
-21,650 (-433 x HKD50) |
Triggered |
| Latest HSI Futures |
22,567 |
|---|---|
| Spread |
-433 |
| Unrealised loss (HKD) |
-21,650 (-433 x HKD50) |
| Margin Call |
Triggered |
Margin calls are to be met by customers in order to maintain the position. Any unsatisfied margin calls might be subject to liquidation.
1Assuming the customer only maintains this contract with initial margin of HKD108,250 in his account.
To find out more about index futures listed in Hong Kong, please click here.
To learn more about stock futures listed in Hong Kong, please click here.
For investor information about futures, please click here [PDF].
For more information on the trading hours in major exchanges, please click here [PDF].
An option is a financial derivative based on an underlying asset, where a financial contract will be set up between an option buyer and an option seller. There are two type of options: call and put.
Listed options are a popular financial instrument offered by HSBC Broking that satisfy investors' versatile needs, e.g. leverage, hedging, arbitrage, profit lock and stock purchase at a preset price, etc. with underlyings including stock and index.
To know more about index options listed in Hong Kong, please click here.
To know more about stock options listed in Hong Kong, please click here.
For investor information about options, please click here [PDF].
For more information regarding trading hours in major exchanges, please click here [PDF].
A warrant is a derivative instrument through which its holder has the right to buy or sell an underlying asset at a predetermined price within a specified time.
In the market, there are three main categories of warrants. These are 1) equity (subscription) warrants and 2) derivative warrants and 3) inline warrants.
Equity (subscription) warrants are issued by a listed company with a maturity of one to five years. They offer holders the right to subscribe for shares of the issuer. Equity warrants are often issued together with new shares in initial public offerings, or distributed along with shares acquired as dividend payments, bonus issues or rights issues. Once these warrants are exercised, the listed company will issue new shares to their holders and acquire additional capital. The warrant issuer has to specify whether the warrant will be settled by cash or by physical delivery of shares.
Derivative warrants are a kind of derivative instrument or structured product. Underlying assets include ordinary shares, indices, currencies, baskets of shares, commodities or futures contracts. They are usually issued by a third party, usually financial institution, which is independent to the issuer of the underlying assets.
Derivatives warrants can be settled by cash or physical delivery; however, almost all listed derivative warrants currently traded in Hong Kong are cash-settled. Warrants linked to a basket of securities, stock indices or securities listed in other jurisdictions are generally be settled by cash. Derivative warrants provide investors with a wider range of instruments for hedging or investment trading purposes.
For further information on derivative warrants listed in Hong Kong, please click here.
Inline warrants are a type of structured product that entitles investors to receive a pre-determined fixed payment at expiry, depending on whether the underlying falls i) at or within or ii) outside the upper and lower strikes at expiry. The underlying of inline warrants can be stock indices or shares, where only cash settlement is allowed.
For further information on inline warrants listed in Hong Kong, please click here.
Callable Bull/ Bear Contracts (CBBCs) are a kind of derivative instruments or structured products. They are one of the most popular products in Hong Kong. They're leveraged instruments that track the performance of underlying assets without requiring investors to pay the full price required to own the actual assets.
CBBCs are issued either as Callable Bull or Callable Bear contracts, allowing investors to take bullish or bearish positions on the underlying assets. They're generally issued by a third party, independent from the underlying assets, usually an investment bank.
CBBCs have important features that investors should understand before buying them. These include: their callable nature, spot price, strike price, callability, finance cost, expiry date, entitlement ratio and underlying asset.
For further information on CBBCs listed in Hong Kong, please click here.
1. I want to trade US securities. What US exchanges do you support?
We support trading US securities listed on the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ) and American Stock Exchange (AMEX).
2. What is the impact if a US security in my account is delisted?
We are not able to provide trading, settlement or (voluntary or involuntary) corporate action-related services for delisted securities.
3. I have an option in my account over a delisted US security. What can I do with that option?
Please contact us to make alternative arrangements, such as closing the open position(s) or transferring the open position(s) to other brokers.
4. I have a long call over a delisted US security. Can I exercise the call?
Yes. If you exercise the call or the call is exercised automatically by the exchange and we are unable to facilitate you taking physical delivery of security, we will sell it at a price we believe to be reasonable and credit your account with the proceeds.
5. I have a short call over a delisted US security. What will happen if the call option is assigned?
If you have a sufficient quantity of the security in your account to fully deliver under the call, we will sell it to the holder and credit your account with the proceeds. If you don’t, either (a) you can transfer the security from another broker or custodian to us or (b) we will buy it at a price we believe to be reasonable and debit the cost of the purchase from your account.
6. I have a long put over a delisted US security. Can I exercise the put?
Yes. You can exercise the put or the put can be exercised automatically by the exchange.
If you have a sufficient quantity of the security in your account to fully deliver under the put, we will sell it to the holder and credit your account with the proceeds. If you don’t, either (a) you can transfer the security from another broker or custodian to us or (b) we will buy it at a price we believe to be reasonable and debit the cost of the purchase from your account.
7. I have a short put over a delisted US security. What will happen if the put option is assigned?
If we are unable to facilitate you taking physical delivery of the security, we will sell it at a price we believe to be reasonable and credit your account with the proceeds.
Futures contracts are derivative instruments. They represent a commitment to buy or sell predefined amounts of underlying assets (e.g. stocks, commodities, currencies etc.) at predetermined price on a specified future date.
Exchange traded futures are standardised futures contracts that are listed in exchanges. HSBC Broking provide services covering major futures exchanges around the world, including the New York Mercantile Exchange (NYMEX), Chicago Mercantile Exchange and the Chicago Board of Trade (CME Group), Intercontinental Exchange (ICE), EUREX and Hong Kong Futures Exchange (HKFE).
Scenario Analysis
Assuming customer buys a contract of Hang Sang Index (HSI) Futures (Oct) at a quote of 23,000. The contract multiplier is HKD50 per index point, and the initial margin and maintenance margin is HKD108,250 and HKD86,600 respectively. Below are examples to illustrate the investment returns basing on different scenarios of HSI futures movement.
| Scenario |
Initial open position (HKD) |
Initial margin (HKD) |
Maintenance margin (HKD) |
HSI Future Movement |
HSI Future at close |
Spread |
Realised profit/ (loss) (HKD) |
Return on investment (HKD) |
|---|---|---|---|---|---|---|---|---|
| 1 |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
108,250 |
86,600 |
No Change |
23,000 |
0 | +0 (+0 x HKD50) |
N/A |
| 2 |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
108,250 |
86,600 |
Favourable |
23,300 |
300 | +15,000 (+300 x HKD50) |
+14% (+15,000 out of 108,250) |
| 3 | 23,000 x HKD50 (contract multiplier) = +1,150,000 |
108,250 |
86,600 |
Unfavourable |
22,700 |
-300 | -15,000 (300 x HKD50) |
-14% (-15,000 out of 108,250) |
| Scenario |
1 |
|---|---|
| Initial open position (HKD) |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
| Initial margin (HKD) |
108,250 |
| Maintenance margin (HKD) |
86,600 |
| HSI Future Movement |
No Change |
| HSI Future at close |
23,000 |
| Spread |
0 |
| Realised profit/ (loss) (HKD) |
+0 (+0 x HKD50) |
| Return on investment (HKD) |
N/A |
| Scenario |
2 |
| Initial open position (HKD) |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
| Initial margin (HKD) |
108,250 |
| Maintenance margin (HKD) |
86,600 |
| HSI Future Movement |
Favourable |
| HSI Future at close |
23,300 |
| Spread |
300 |
| Realised profit/ (loss) (HKD) |
+15,000 (+300 x HKD50) |
| Return on investment (HKD) |
+14% (+15,000 out of 108,250) |
| Scenario |
3 |
| Initial open position (HKD) |
23,000 x HKD50 (contract multiplier) = +1,150,000 |
| Initial margin (HKD) |
108,250 |
| Maintenance margin (HKD) |
86,600 |
| HSI Future Movement |
Unfavourable |
| HSI Future at close |
22,700 |
| Spread |
-300 |
| Realised profit/ (loss) (HKD) |
-15,000 (300 x HKD50) |
| Return on investment (HKD) |
-14% (-15,000 out of 108,250) |
From the above scenario, if the unrealised loss in the contract is equal to or more than HKD21,650 (ie Initial margin minus maintenance margin required), margin call will be triggered1. This can be further translated to a drop of 433 points in HSI Futures as follows.
| Latest HSI Futures |
Spread |
Unrealised loss (HKD) |
Margin Call |
|---|---|---|---|
| 22,567 |
-433 |
-21,650 (-433 x HKD50) |
Triggered |
| Latest HSI Futures |
22,567 |
|---|---|
| Spread |
-433 |
| Unrealised loss (HKD) |
-21,650 (-433 x HKD50) |
| Margin Call |
Triggered |
Margin calls are to be met by customers in order to maintain the position. Any unsatisfied margin calls might be subject to liquidation.
1Assuming the customer only maintains this contract with initial margin of HKD108,250 in his account.
To find out more about index futures listed in Hong Kong, please click here.
To learn more about stock futures listed in Hong Kong, please click here.
For investor information about futures, please click here [PDF].
For more information on the trading hours in major exchanges, please click here [PDF].
An option is a financial derivative based on an underlying asset, where a financial contract will be set up between an option buyer and an option seller. There are two type of options: call and put.
Listed options are a popular financial instrument offered by HSBC Broking that satisfy investors' versatile needs, e.g. leverage, hedging, arbitrage, profit lock and stock purchase at a preset price, etc. with underlyings including stock and index.
To know more about index options listed in Hong Kong, please click here.
To know more about stock options listed in Hong Kong, please click here.
For investor information about options, please click here [PDF].
For more information regarding trading hours in major exchanges, please click here [PDF].
A warrant is a derivative instrument through which its holder has the right to buy or sell an underlying asset at a predetermined price within a specified time.
In the market, there are three main categories of warrants. These are 1) equity (subscription) warrants and 2) derivative warrants and 3) inline warrants.
Equity (subscription) warrants are issued by a listed company with a maturity of one to five years. They offer holders the right to subscribe for shares of the issuer. Equity warrants are often issued together with new shares in initial public offerings, or distributed along with shares acquired as dividend payments, bonus issues or rights issues. Once these warrants are exercised, the listed company will issue new shares to their holders and acquire additional capital. The warrant issuer has to specify whether the warrant will be settled by cash or by physical delivery of shares.
Derivative warrants are a kind of derivative instrument or structured product. Underlying assets include ordinary shares, indices, currencies, baskets of shares, commodities or futures contracts. They are usually issued by a third party, usually financial institution, which is independent to the issuer of the underlying assets.
Derivatives warrants can be settled by cash or physical delivery; however, almost all listed derivative warrants currently traded in Hong Kong are cash-settled. Warrants linked to a basket of securities, stock indices or securities listed in other jurisdictions are generally be settled by cash. Derivative warrants provide investors with a wider range of instruments for hedging or investment trading purposes.
For further information on derivative warrants listed in Hong Kong, please click here.
Inline warrants are a type of structured product that entitles investors to receive a pre-determined fixed payment at expiry, depending on whether the underlying falls i) at or within or ii) outside the upper and lower strikes at expiry. The underlying of inline warrants can be stock indices or shares, where only cash settlement is allowed.
For further information on inline warrants listed in Hong Kong, please click here.
Callable Bull/ Bear Contracts (CBBCs) are a kind of derivative instruments or structured products. They are one of the most popular products in Hong Kong. They're leveraged instruments that track the performance of underlying assets without requiring investors to pay the full price required to own the actual assets.
CBBCs are issued either as Callable Bull or Callable Bear contracts, allowing investors to take bullish or bearish positions on the underlying assets. They're generally issued by a third party, independent from the underlying assets, usually an investment bank.
CBBCs have important features that investors should understand before buying them. These include: their callable nature, spot price, strike price, callability, finance cost, expiry date, entitlement ratio and underlying asset.
For further information on CBBCs listed in Hong Kong, please click here.
1. I want to trade US securities. What US exchanges do you support?
We support trading US securities listed on the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ) and American Stock Exchange (AMEX).
2. What is the impact if a US security in my account is delisted?
We are not able to provide trading, settlement or (voluntary or involuntary) corporate action-related services for delisted securities.
3. I have an option in my account over a delisted US security. What can I do with that option?
Please contact us to make alternative arrangements, such as closing the open position(s) or transferring the open position(s) to other brokers.
4. I have a long call over a delisted US security. Can I exercise the call?
Yes. If you exercise the call or the call is exercised automatically by the exchange and we are unable to facilitate you taking physical delivery of security, we will sell it at a price we believe to be reasonable and credit your account with the proceeds.
5. I have a short call over a delisted US security. What will happen if the call option is assigned?
If you have a sufficient quantity of the security in your account to fully deliver under the call, we will sell it to the holder and credit your account with the proceeds. If you don’t, either (a) you can transfer the security from another broker or custodian to us or (b) we will buy it at a price we believe to be reasonable and debit the cost of the purchase from your account.
6. I have a long put over a delisted US security. Can I exercise the put?
Yes. You can exercise the put or the put can be exercised automatically by the exchange.
If you have a sufficient quantity of the security in your account to fully deliver under the put, we will sell it to the holder and credit your account with the proceeds. If you don’t, either (a) you can transfer the security from another broker or custodian to us or (b) we will buy it at a price we believe to be reasonable and debit the cost of the purchase from your account.
7. I have a short put over a delisted US security. What will happen if the put option is assigned?
If we are unable to facilitate you taking physical delivery of the security, we will sell it at a price we believe to be reasonable and credit your account with the proceeds.
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