31 December 2007
LKB HSI Warrant Trading System
By Canslim - http://www.canslim.sg/?p=13
An intro of warrant types
There are 2 major types of warrants. The first is corporate warrants and it is issued by the corporations mostly attached to an offering of bonds or right issues. The second type is the covered warrants which is issued by the third party and mostly by financial institutions.
Unlike corporate warrants the exercise of covered warrants will not result in dilution of earnings in the company since there is no new shares will be issued.
On this topic the word warrants refers to covered warrants. And to understand more of the warrants you can refer to educational section of the warrant issues. As an example Macquarie offers a comprehensive education section about covered warrants.
LKB HSI Warrant Trading System
What is actually LKB HSI warrant trading system?
LKB refers to the author (Lee Kok Beng) who publishes his warrant trading system in CNA forum and HSI refers to the underlying instrument Hang Seng Index.
His strategy is very simple and the duration of the trading is very short term.
His strategy capitalizes the DJIA futures and sentiment of European market with the expectation the sentiment will be carrying over to the end of trading hour.
Here is an example of buying a call warrant:
The DJIA futures is up 50 points and all the European indices are trading in the positive territory, the LKB system will open a HSI call position 15 minutes before Singapore market closing (4:45PM SGT) and carrying over the position to the next trading day. The system stresses the discipline of closing all the open position on the next trading day. For this example if the US indices close positive the system allows you to find best profit-taking anytime before 10AM SGT (before opening of Hong Kong Exchange) but if the US indices close against your position you need to close the position immediately at opening bell of Singapore Exchange (9:00 AM SGT).
Here are the steps to be taken to open a position:
Check DJIA futures and European market whether they move in the same direction at 4:40-4:45 PM SGT
If not (example US red while European are green or vice versa) then stay sideline.
If both markets are in sync then check the DJIA futures value and move on the step 3.
If DJIA futures is >+30 points then buy HSI call warrants
if DJIA is <-30 points then buy HSI put warrants. If the DJIA value is between -30 and 30 points then stay sideline.
Here are the steps to be taken to close a position:
Check the US market overnight closing before Singapore market opens.
If you’re wrong (the market against you) then cut loss immediately at the opening bell at 9:00 AM.
If you’re right (market moves in your favor) then you may hold the position til 9:30 AM or later to take the ride from advancing/declining HSI indices.
If the market doesn’t move much it’s preferably to close position immediately once you’re break even.
Important References:
Hong Kong Exchange trading hours: from 10:00am to 12:30pm and from 2:30pm to 4:00pm
Singapore Exchange trading hours: from 9:00am to 12:30pm and from 2:00pm to 5:00pm
DJIA Futures - http://money.cnn.com/data/premarket/
European Indices - http://finance.yahoo.com/?u/
By Canslim - http://www.canslim.sg/?p=13
An intro of warrant types
There are 2 major types of warrants. The first is corporate warrants and it is issued by the corporations mostly attached to an offering of bonds or right issues. The second type is the covered warrants which is issued by the third party and mostly by financial institutions.
Unlike corporate warrants the exercise of covered warrants will not result in dilution of earnings in the company since there is no new shares will be issued.
On this topic the word warrants refers to covered warrants. And to understand more of the warrants you can refer to educational section of the warrant issues. As an example Macquarie offers a comprehensive education section about covered warrants.
LKB HSI Warrant Trading System
What is actually LKB HSI warrant trading system?
LKB refers to the author (Lee Kok Beng) who publishes his warrant trading system in CNA forum and HSI refers to the underlying instrument Hang Seng Index.
His strategy is very simple and the duration of the trading is very short term.
His strategy capitalizes the DJIA futures and sentiment of European market with the expectation the sentiment will be carrying over to the end of trading hour.
Here is an example of buying a call warrant:
The DJIA futures is up 50 points and all the European indices are trading in the positive territory, the LKB system will open a HSI call position 15 minutes before Singapore market closing (4:45PM SGT) and carrying over the position to the next trading day. The system stresses the discipline of closing all the open position on the next trading day. For this example if the US indices close positive the system allows you to find best profit-taking anytime before 10AM SGT (before opening of Hong Kong Exchange) but if the US indices close against your position you need to close the position immediately at opening bell of Singapore Exchange (9:00 AM SGT).
Here are the steps to be taken to open a position:
Check DJIA futures and European market whether they move in the same direction at 4:40-4:45 PM SGT
If not (example US red while European are green or vice versa) then stay sideline.
If both markets are in sync then check the DJIA futures value and move on the step 3.
If DJIA futures is >+30 points then buy HSI call warrants
if DJIA is <-30 points then buy HSI put warrants. If the DJIA value is between -30 and 30 points then stay sideline.
Here are the steps to be taken to close a position:
Check the US market overnight closing before Singapore market opens.
If you’re wrong (the market against you) then cut loss immediately at the opening bell at 9:00 AM.
If you’re right (market moves in your favor) then you may hold the position til 9:30 AM or later to take the ride from advancing/declining HSI indices.
If the market doesn’t move much it’s preferably to close position immediately once you’re break even.
Important References:
Hong Kong Exchange trading hours: from 10:00am to 12:30pm and from 2:30pm to 4:00pm
Singapore Exchange trading hours: from 9:00am to 12:30pm and from 2:00pm to 5:00pm
DJIA Futures - http://money.cnn.com/data/premarket/
European Indices - http://finance.yahoo.com/?u/
Labels: Stock Trading System
