[Warrant Practical Guide] US stocks have fallen for three consecutive days, high oil prices have reignited inflation concerns! Tesla plunged, warrants 'rollover' for hedging; how to deploy during gold and silver pullbacks

Macro Market: Why is the US Stock Market Pulling Back from Highs?$NVIDIA(NVDA.US) $KNOWLEDGE ATLAS(02513.HK) $Tesla(TSLA.US)

Olga: Hello everyone! Welcome to "Warrant Practical Strategy." Recently, the overall US stock market and some popular stocks have been pulling back, and the Hong Kong market is no exception. I'd like to ask Keith, do you think this adjustment in US stocks was expected, or are there new factors in the market?

Keith: Actually, market focus keeps shifting. In April, everyone was focused on Q1 earnings reports, with over 80% of companies beating expectations. Combined with anticipation for AI spending, the S&P 500 kept hitting new highs, reaching a peak of 7,500 points. Back then, people even somewhat ignored factors like geopolitics.
Now that the earnings season is over, it's normal for US stocks to adjust after reaching highs. Currently, the market is refocusing on two core issues: first, oil prices, which have remained high at $100 to $110 per barrel, raising global concerns that high oil prices will push up inflation. Second, with rising inflation expectations, people are starting to worry whether central banks will be forced to restart interest rate hikes. Recently, bond yields have risen in many parts of the world. Therefore, some investors are choosing to take profits at high levels, leading to an orderly pullback in the market over the past few days, not a panic sell-off.
2. Derivatives: How to Hedge Using the S&P and Nvidia?

Olga: Since the market is in an orderly decline, does this present an opportunity for investors to reposition or hedge?

Keith: Absolutely. If you are bullish long-term but worried about short-term adjustments, you can use warrants or bull/bear certificates for short-term deployment. For example, in terms of the broader market, funds have flowed into put warrants or bear certificates on the S&P 500 for four out of the past five days to hedge losses in stock portfolios.
Additionally, Nvidia is announcing its earnings tonight. Historical data shows that Nvidia's stock price often pulls back one to five days after its earnings announcements over the past few quarters. This is because if the earnings only meet expectations without a big surprise, many funds will take the opportunity to cash in profits.

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Bullish on a rebound: You can consider short-term call warrant 11007 (actual leverage 6.4x), suitable for short-term rebound plays after earnings.

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Short-term hedge: You can consider the longer-term put warrant 11090 (actual leverage 3.6x).
Its advantage is that Nvidia's earnings are announced after the US market closes. Tomorrow during Asian hours (Hong Kong time), the underlying stock's warrants will reflect this news first, allowing investors to operate flexibly during the Asian session without waiting for the US market to open.
3. Practical Operation: The "Rolling Over" Technique for Tesla Warrants

Olga: Speaking of operations, one of our viewers (CS7) sold a short-term Societe Generale Tesla call warrant at a high last week and rolled over to a longer-term call warrant (11134) expiring at the end of October during yesterday's pullback. How is this operation?

Keith: This is a very smart and correct strategy! Many investors like to buy very short-term (e.g., expiring at the end of June) and out-of-the-money products because of their high leverage (possibly up to 13x). However, the time value of such products decays extremely fast each day. Once the stock price doesn't move much or even falls, the product price can easily drop below $0.01. Once it falls below one cent, the issuer cannot quote, and investors wanting to exit can't get out. If it remains out-of-the-money at expiry, it becomes worthless.
Like this viewer, when the underlying stock falls quickly, timely rolling over to a longer-term product (e.g., 11134 expiring at the end of October), although the leverage is slightly lower, the time decay is much slower, and the defensive nature is much stronger. This is an excellent demonstration of operation.
4. Hong Kong Stock AI Sector: Zhipu (2513) and MiniMax (100) Term Traps

Olga: Understood. Regarding the Hong Kong market, the Hang Seng Index recently fell below its 10-day moving average. But people noticed that some AI concept stocks (like 2513 Zhipu, 100 MiniMax) are starting to diverge, with 2513 seemingly stronger. Moreover, buying just one board lot of these underlying stocks often costs tens of thousands or even hundreds of thousands of HKD, making them unaffordable. If you want to deploy using warrants costing a few thousand HKD per board lot, what should you pay attention to?

Keith: HKEX recently approved these two new stocks to issue warrants. Their different performance is mainly due to their different business natures: Zhipu (2513) belongs to the highly market-focused AI infrastructure, while MiniMax (100) is AI software development, so the level of capital interest differs.
Using call warrants on these two stocks to enter the market indeed allows participation with less capital, but everyone must pay attention to a major characteristic—low leverage. Taking Zhipu call warrant 28467 as an example, although it is very out-of-the-money, its actual leverage is only a little over 2x. This is because the historical volatility of these emerging AI stocks themselves is very high (over 150%), causing the warrants' implied volatility to be as high as 160% to 170%. Extremely high implied volatility directly and significantly reduces warrant leverage. This is a term trap everyone must see clearly before investing.

5. Commodity Market: Gold and Silver Safe-Haven Deployment

Olga: I didn't realize high implied volatility would suppress leverage; everyone really needs to pay attention to that. Finally, regarding the commodity market, gold and silver prices have also adjusted recently. If you want to hedge, what's the outlook?

Keith: That's right, gold prices have pulled back to the $4,400, $4,500 level in the past day or two. But in the long run, as long as people remain worried about inflation and geopolitical risks, gold is an excellent macro hedge tool.

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Bullish on gold: For a more conservative approach, you can consider call warrant 11124 (expiring end of September/actual leverage 7.8x).
Besides gold, we recently also launched silver warrants. The biggest difference between silver and gold is that silver's volatility is much greater than gold's. In the past, it was difficult to invest directly in silver during Asian hours (HKEX). Now, with warrants, there are more choices:

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Bullish on silver (aggressive): You can consider call warrant 11125 (expiring end of September/strike price 90 units/4x leverage).

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Bullish on silver (conservative): You can consider call warrant 11127 (expiring end of December/strike price 70 units in-the-money/2.9x leverage).

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Bearish on silver: There is also put warrant 11126 to choose from.
Everyone can search the website for strike prices suitable for their own risk tolerance to deploy based on their sensitivity to gold and silver prices.