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What is Wolun (introductory knowledge)?
1. What is a wheel?
Wolun, English name Warranty, translated as "warrant" in mainland China. It is a 'proof of rights'. When holding a certain round, you have the "right" to buy/sell a certain stock at a specified price on a specified date.
For the sake of understanding the concept of a 'bun', for example, let's assume that the current market price of apples is 100 yuan per bag. At this point, the seller proposes that the buyer can purchase a voucher for 10 yuan, and both parties agree that after one year, the buyer can purchase apples at a price of 120 yuan per bag. If the buyer predicts that the price of apples will rise in the future and is willing to purchase this certificate, and one year later the price of apples is higher than 130 yuan, the buyer can buy apples at a profit of 120 yuan. On the contrary, if the price of Apple is below 130 yuan, the buyer will not use this voucher and the seller will earn 10 yuan.
In the market, after the buyer purchases a certificate related to Apple, it can also be freely traded and circulated before the certificate expires. The buyer and seller of the certificate trade based on their own judgment of the future price of Apple.
Moreover, due to the fact that the price of the Apple voucher itself is 10 yuan, much lower than the market price of 100 yuan/bag for apples, changes in the price trend of apples have a huge impact on the price of the voucher, and its price fluctuations will be more severe.
The above purchase vouchers for Apple can be seen as a type of subscription round, which is divided into two types: subscription and put, with the following properties:
Wolun can be bought or sold on "Beiniu Securities" before expiration. At maturity, the fund is generally settled in cash and does not involve physical buying or selling of related assets.
For the sake of understanding the concept of a 'bun', for example, let's assume that the current market price of apples is 100 yuan per bag. At this point, the seller proposes that the buyer can purchase a voucher for 10 yuan, and both parties agree that after one year, the buyer can purchase apples at a price of 120 yuan per bag. If the buyer predicts that the price of apples will rise in the future and is willing to purchase this certificate, and one year later the price of apples is higher than 130 yuan, the buyer can buy apples at a profit of 120 yuan. On the contrary, if the price of Apple is below 130 yuan, the buyer will not use this voucher and the seller will earn 10 yuan.
In the market, after the buyer purchases a certificate related to Apple, it can also be freely traded and circulated before the certificate expires. The buyer and seller of the certificate trade based on their own judgment of the future price of Apple.
Moreover, due to the fact that the price of the Apple voucher itself is 10 yuan, much lower than the market price of 100 yuan/bag for apples, changes in the price trend of apples have a huge impact on the price of the voucher, and its price fluctuations will be more severe.
The above purchase vouchers for Apple can be seen as a type of subscription round, which is divided into two types: subscription and put, with the following properties:
Wolun can be bought or sold on "Beiniu Securities" before expiration. At maturity, the fund is generally settled in cash and does not involve physical buying or selling of related assets.
2. The naming convention of the wheel
use“Tencent UBS Bayi Purchase A (@ EC))”（16969.HK）as an example：
1) Tencent is the name of the main stock;
2) UBS represents the issuer;
3) August 1st represents the exercise year and month of the Wolun. This vessel will exercise its rights in January 2018. If there is only one word, it represents the exercise year, and the specific exercise month needs to be viewed by clicking;
4) The last word, buy/sell, represents whether this round is for subscription or put;
5) The last letter A/B/C/D represents that UBS is likely to issue warrants against Tencent at the same time, but with different exercise conditions (such as exercise price). Use ABCD to distinguish;
6) The content in parentheses: "@" indicates cash delivery at maturity, "*" represents physical (stock) delivery at maturity (which is basically non-existent); 'E' indicates European style, and if 'X' is used, it indicates special or non-traditional type of wheel (see its terms for details); 'C' indicates a subscription certificate, and 'P' indicates a put certificate.
In summary, the name of this round refers to an A-class European style subscription round issued by Swiss banks, with Tencent Holdings as the target, expiring in January 2018 and delivered in cash.
2) UBS represents the issuer;
3) August 1st represents the exercise year and month of the Wolun. This vessel will exercise its rights in January 2018. If there is only one word, it represents the exercise year, and the specific exercise month needs to be viewed by clicking;
4) The last word, buy/sell, represents whether this round is for subscription or put;
5) The last letter A/B/C/D represents that UBS is likely to issue warrants against Tencent at the same time, but with different exercise conditions (such as exercise price). Use ABCD to distinguish;
6) The content in parentheses: "@" indicates cash delivery at maturity, "*" represents physical (stock) delivery at maturity (which is basically non-existent); 'E' indicates European style, and if 'X' is used, it indicates special or non-traditional type of wheel (see its terms for details); 'C' indicates a subscription certificate, and 'P' indicates a put certificate.
In summary, the name of this round refers to an A-class European style subscription round issued by Swiss banks, with Tencent Holdings as the target, expiring in January 2018 and delivered in cash.
3. Characteristics of Wolun
1) The factors that affect the price of idle ships include related asset prices, maturity time, implied volatility, and market supply and demand;
2) There is a maturity date (ranging from 3 months to 5 years), at which time it cannot be bought or sold again. Cash settlement is required, and there is no stock settlement;
3) Without the redemption price in bull/bear contracts, investors can hold until the maturity date;
4) Although warrants have expiration dates, investors can buy and sell them at any time without necessarily holding them until the expiration date;
5) Can use cash or margin accounts to buy and sell all derivative warrants listed on the Hong Kong Stock Exchange;
6) No need to pay stamp duty, low cost.
2) There is a maturity date (ranging from 3 months to 5 years), at which time it cannot be bought or sold again. Cash settlement is required, and there is no stock settlement;
3) Without the redemption price in bull/bear contracts, investors can hold until the maturity date;
4) Although warrants have expiration dates, investors can buy and sell them at any time without necessarily holding them until the expiration date;
5) Can use cash or margin accounts to buy and sell all derivative warrants listed on the Hong Kong Stock Exchange;
6) No need to pay stamp duty, low cost.
4. How to choose a wheel
1) The direction of stocks: Based on the rise and fall of the underlying stocks, buy and subscribe for bullish stocks and buy and sell for bearish stocks;
2) Choose Exercise Price: If you believe that the stock price will rise sharply in the short term, you can pay attention to subscription certificates with an exercise price of 10% to 15% outside the price. If you believe that the stock price is only repeatedly rising, you should choose smaller out of price or in price rounds;
3) Choose expiration date: Choose a lease that expires between 3 to 9 months, with a moderate time price and low risk. If you plan to hold it for the long term, you can choose to hold it for a longer period of time;
4) Choosing leverage: Generally speaking, the more out of price or close to the maturity date, the higher the actual leverage will be. The higher the leverage, the higher the return, but the greater the risk;
5) Comparing extended wave amplitudes: For vessels with similar terms, the extended wave amplitudes can be compared. The larger the extended wave amplitude, the higher the price of the vessel;
6) Market transaction volume: The higher the street to goods ratio, the easier it is for the price of the market to be affected by supply and demand;
7) Issuer quality: The issuer's past pricing quality, such as slow pricing or price differentials, can affect trading execution.
2) Choose Exercise Price: If you believe that the stock price will rise sharply in the short term, you can pay attention to subscription certificates with an exercise price of 10% to 15% outside the price. If you believe that the stock price is only repeatedly rising, you should choose smaller out of price or in price rounds;
3) Choose expiration date: Choose a lease that expires between 3 to 9 months, with a moderate time price and low risk. If you plan to hold it for the long term, you can choose to hold it for a longer period of time;
4) Choosing leverage: Generally speaking, the more out of price or close to the maturity date, the higher the actual leverage will be. The higher the leverage, the higher the return, but the greater the risk;
5) Comparing extended wave amplitudes: For vessels with similar terms, the extended wave amplitudes can be compared. The larger the extended wave amplitude, the higher the price of the vessel;
6) Market transaction volume: The higher the street to goods ratio, the easier it is for the price of the market to be affected by supply and demand;
7) Issuer quality: The issuer's past pricing quality, such as slow pricing or price differentials, can affect trading execution.
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