• Home/
  • Securities/
  • Callable Bull/Bear Contracts


Callable Bull/Bear Contracts

The short form of Callable Bull/Bear Contracts is CBBC, a structured product of underlying assets. The underlying assets of CBBC could be stocks, indices, currencies or commodities and CBBCs are issued by qualified investment banks. Investors only pay part of amount to control leveraged assets to achieve considerable return with small amount of investment. Although the return is attractive, the volatility of return is much higher than stocks and indices for the reason of leverage, investors need to bear high risks, so CBBC is like a two-edged knife.

Code and Name of CBBCs

Stock Code of CBBCs
Chinese Name of CBBCs
English Name of CBBCs:
Code Description
QQ Up to 5 characters representing name of the underlying asset
ZZ Issuer’s short name
YYMM Expiry year and month
N N=No residual value; R=With residual value
牛/C C=Bull contract; P=Bear contract
A Serial number for additional issues by the same issuer on same underlying asset with same expiry year and month (A, B, C…)
* Indicator for CBBCs traded in Renminbi (RMB)

Categories of CBBCs

Bull contracts, expecting the price of underlying assets goes up; bear contracts, expecting the price of underlying assets goes down. CBBCs are classified as N Type and R Type, their expiry dates are generally 3 months to 5 years.
Bull Contract
N Type
Price of underlying assets > Call price = Strike price
R Type
Price of underlying assets > Call price = Strike price
Bear Contract
N Type
Price of underlying assets < Call price = Strike price
R Type
Price of underlying assets < Call price = Strike price

N Type - Price of underlying assets > Call price > Strike price

R Type - With setting residual value, means taking back part of principal or losing all the principal; Only R Type CBBCs are issued at the moment.

One of the characteristics of CBBCs is that it sets a mechanism of mandatory call. When the price of underlying assets touches the call price, the trading of the CBBC is terminated instantly, commonly known as target shooting and the original expiry date is invalid.

Pricing of CBBCs

Price of CBBCs is composed by intrinsic value and finance cost. It needs to pay commission, transaction levy, trading fee but no stamp duty in trading CBBCs.
Value of CBBCs =
Intrinsic Value + Finance Cost
Value of CBBCs =
(Price of Underlying Assets – Strike Price)
Entitlement Ratio
Strike Price
Entitlement Ratio
* Fin. Int. Rate *
Days to Expiry
Days to Expiry

Major Risks of CBBCs

The incentives in trading CBBCs are leverage effect, low admission fee, simple trading, controlled maximum loss. Investors will loss the principal in the worst case without additional deposit. Nevertheless, the volatility of CBBCs is scaled up for the reason of leverage and CBBCs could be suspended trading and called back in advance for market situations, investors may also loss their invested principal. An investor should soundly understand the characteristics and risks of CBBCs, ensure related CBBCs fit his/her financial situations and risk tolerances, or he/she should consult his/her professional investment consultant(s) first. At the same time, investors must mind the following factors.

Market Factors:

Liquidity of related underlying assets will directly affect the price of CBBCs. If related underlying assets are illiquid, it may increase the issuers’ hedging cost, directly increase finance cost of CBBCs.

Entitlement Ratio:

When the market volatility is low and investors’ trading is less, investors may consider choosing CBBCs with higher sensitivity, lower entitlement ratio, vice versa.

Choice of Call Price:

Avoid calling back CBBCs, investors should choose the call price of CBBCs that the price of underlying assets will not fall below support level or rise through resistance level. Taking Hang Seng Index as an example, the gap between call price and the price of Hang Seng Index getting smaller, call risk is higher. Based on the leverage effect, the potential return is getting higher, vice versa.

Choice of Issuers:

Do issuers quote justified price based on the factors of price volatility of related underlying assets, liquidity and so on.