Retail investors cash in on Hong Kong's severe market rout

Investors trading callable bull/bear contracts made about $480m in profits.

Bloomberg reports that the earlier stock selloff that hammered Hong Kong equities hard and erased almost US$200b in value actually left retail investors with profit as their bearish contract holdings proved sufficient to weather the losses. 

Investors who trade callable bull/bear contracts (CBBC) made around $480m (US$61m) from bear contracts which surpassed the $200m loss incurred by bull versions, Dick Chau, director for UBS Group AG’s equity-derivatives sales in Asia told Bloomberg.

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On Tencent alone, investors could have generated around $61m profit from bear contracts which more than offsets that $28m loss on bullish ones, he added.

“People might think CBBC investors suffered from the market drop and knock-outs of Tencent and HSI bulls, but actually they made money,” Chau said in a phone interview. “It’s the nature of these products -- limited losses and unlimited upside.”

The local stock market entered bear territory in September 11 wiith the Hang Seng Index down more than 20% from its January peak as mounting trade tensions and emerging market-sell off hit investor sentiment hard.

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