The popularity of short-term options contracts in overseas markets has spurred Hong Kong Exchanges and Clearing into launching similar products on the local bourse, and market participants are confident these will catch on among investors here as well. As part of Hong Kong stock exchange operator’s three-year strategic programme, the HKEX introduced in-line warrants in July and US dollar metal contracts last month, which have proved to be popular among retail investors and brokers. And from September 16, the HKEX will introduce four weekly options contracts – two based on the Hang Seng Index and two on the Hang Seng China Enterprises Index or the H-share Index. Wong Pak-chung, co-head of equities product development at HKEX, said that because of the short term nature of these products compared to other contracts that range from one month to a year, the entry point for investors was much lower. “These products are very popular with retail investors in overseas markets,” said Wong. As an example, Wong explained that retail investors would only need about HK$8,000 to buy a Hang Seng Index weekly options contract compared with HK$29,000 for a one-month options contract. “The leverage and return could be higher for the weekly index option contracts than the normal monthly contracts,” Wong said, but he added that investors should also note the risks associated with these shorter-term contracts may also be higher. ‘Fat finger’ blunders causing sudden stock price volatility in Hong Kong may end with cool-off time curbs Globally, the Chicago Board Options Exchange’s S&P 500 weekly option is the most widely traded product, which had an average daily turnover at 506,402 contracts in the first half. It was followed by Taiwan Stock Exchange’s TAIEX weekly options at 411,613 contracts. The leverage and return could be higher for the weekly index option contracts than the normal monthly contracts Wong Pak-chung, co-head of equities product development at HKEX Wong said that Taiwan has a high proportion of retail investors and therefore its weekly options contracts were more popular than the monthly contracts, which see an average of 305,280 deals a day. He said that because Hong Kong has far more institutional investors, the popularity of the weekly options contracts here may not match Taiwan but could be on a par with US and European markets where their trading volume accounts for about 30 to 40 per cent of the monthly contracts volume. Hong Kong-based stockbrokers also noted that retail investors were keen on the upcoming product launches. “Retail investors like [to make] short-term gains, so the short-term option products should suit them,” said Jojo Choy Sze-chung, vice-chairman of the Institute of Securities Dealers. Gordon Tsui Luen-on, managing director of Hantec Pacific and newly elected chairman of the Hong Kong Securities Association, said as the new weekly options products have a low market entry threshold of a few thousand dollars these should be able to attract retail investors. Robert Lee, executive director at brokerage Grand Finance Group, said Hong Kong investors may not initially rush to trade the new products as overall market sentiment is downbeat because of US-China trade war and anti-government protests. “However, the products should be popular in the longer term as overseas experience has shown that weekly options are good hedging tools sought by both retail and institutional investors,” Lee said.