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CBBC

CBBC

What is CBBC?

Like derivative warrants, CBBC are structured products. They are leveraged investments that track the performance of the underlying assets without requiring investors to pay the full price required to own the actual assets. They are issued either as Bull or Bear contracts, allowing investors to take bullish or bearish positions on the underlying assets.

CBBC may be issued with a lifespan of 3 months to 5 years and are settled in cash only. CBBC are issued with the condition that during their lifespan they will be called by the issuers when the price of the underlying assets reaches a level (known as the Call Price) specified in the listing document. If the Call Price is reached before expiry, the CBBC will expire early and the trading of that CBBC will be terminated immediately. The specified expiry date from the listing document will no longer be valid.

What are the characteristics of CBBC?

CBBC can be divided into two categories: Bull Contracts and Bear Contracts. If investors take bullish position on the underlying asset, then choose Bull Contracts; if you take a bearish position, you can choose Bear Contracts.

CBBC have a mandatory call mechanism, that is, if the underlying asset’s prices reach the call price, the issuer must then call the CBBC. The residual value depends on the categories of CBBC, which are namely category N CBBC and category R CBBC.

A Category N CBBC refers to a CBBC where its Call Price is equal to its strike price, and the CBBC holder will not receive any cash payment once the price of the underlying assets reach or go beyond the Call Price.

A Category R CBBC refers to a CBBC where its Call Price is different from its strike price, and the CBBC holder may receive a small cash payment (called "residual value") upon the occurrence of an mandatory call event but in the worst case, no residual value will be paid (Category N CBBC do not have residue value).


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