A trading strategy based on Callable Bull/Bear Contracts

Stephen Y L CHEUNG, Yin Wong Cheung*, Angela W.W. He, Alan T.K. Wan

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

13 Citations (Scopus)


The Callable Bull/Bear Contract is a barrier options contract recently introduced to the Hong Kong market. In this study, we propose a trading strategy that defines the entry point and exit point using information on the contract's call price and mandatory call event. Using data on contracts based on the Hong Kong Hang Seng Index, it is shown that the proposed trading strategy, on average, yields some decent trading returns that vary quite substantially across individual trades. Exploratory analyses indicate that trading returns are associated with volatility observed during a contract's lifespan and, to a lesser extent, with volatility in the pre-issuance period. Further, an issuer's relative issuing frequency may bear some implications for the trading strategy's performance.

Original languageEnglish
Pages (from-to)186-198
Number of pages13
JournalPacific Basin Finance Journal
Issue number2
Publication statusPublished - Apr 2010

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Barrier options
  • Daily highs and lows
  • Trading returns
  • VECM


Dive into the research topics of 'A trading strategy based on Callable Bull/Bear Contracts'. Together they form a unique fingerprint.

Cite this