Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>
Context: Over the past five trading days, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.</li>
<li>
Highlights: Bearish strategies dominated positioning, consistent with Tencent’s downward price trend, while long-volatility structures remained prevalent amid implied volatility trading below historical median levels.</li>
<li>
Why read: This breakdown of complex option strategies sheds light on market sentiment and positioning. Detailed examples provide actionable insights that could inspire similar strategies,</li>
</ul>



Context: Over the past five trading days, Tencent (700 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.

Highlights: Bearish strategies dominated positioning, consistent with Tencent’s downward price trend, while long-volatility structures remained prevalent amid implied volatility trading below historical median levels.

Why read: This breakdown of complex option strategies sheds light on market sentiment and positioning. Detailed examples provide actionable insights that could inspire similar strategies,


Tencent (700 HK) Top Trades: Bearish Positioning and Long Volatility Dominate

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Index Rebalance

<ul>
<li>The Hang Seng indices announced June 2026 index review changes on Friday. Most changes to indices with significant tracking AUM were as expected. Quiddity correctly predicted 11/11 ex-HSI.</li>
<li>HSI was, as always, a process of dart-throwing. HSI is trying to add stocks to increase count, and by our analysis, needed to add names from Healthcare, Industrials, and Materials. </li>
<li>HSI selected one from each. Among the 6 top indices affected, there is HK$29bn to trade across 200 names, but only 12 with more than one day of ADV.</li>
</ul>


The Hang Seng indices announced June 2026 index review changes on Friday. Most changes to indices with significant tracking AUM were as expected. Quiddity correctly predicted 11/11 ex-HSI.
HSI was, as always, a process of dart-throwing. HSI is trying to add stocks to increase count, and by our analysis, needed to add names from Healthcare, Industrials, and Materials. 
HSI selected one from each. Among the 6 top indices affected, there is HK$29bn to trade across 200 names, but only 12 with more than one day of ADV.


[Quiddity Index] HSI Rebal Results Almost All As Predicted - HK$29bn One-Way

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

<ul><li>Tencent reported 1Q26 results: total revenue grew by 9% YoY to RMB196.5bn, 1.5% below Bloomberg consensus estimate, as the later timing of the 2026 Spring Festival led to less revenue recognition for games business in 1Q26; non-IFRS operating income increased by 9% YoY to RMB75.6bn, largely in line with the consensus and our estimate.</li><li>Non-IFRS operating profit excluding new AI product investment grew by 17% YoY to RMB84.4bn, which in our view demonstrates Tencent’s strong operating leverage and capability to maintain steady earnings growth despite stepped-up AI investment.</li><li>The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (&gt;RMB36bn investment in FY26E). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent reported 1Q26 results: total revenue grew by 9% YoY to RMB196.5bn, 1.5% below Bloomberg consensus estimate, as the later timing of the 2026 Spring Festival led to less revenue recognition for games business in 1Q26; non-IFRS operating income increased by 9% YoY to RMB75.6bn, largely in line with the consensus and our estimate.Non-IFRS operating profit excluding new AI product investment grew by 17% YoY to RMB84.4bn, which in our view demonstrates Tencent’s strong operating leverage and capability to maintain steady earnings growth despite stepped-up AI investment.The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (&gt;RMB36bn investment in FY26E). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent (700 HK) - Resilient 1Q26 Earnings Growth Despite AI Investment; Solid AI Progress

Event-Driven

<ul>
<li>
Context:<a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba (BABA US)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd-69366efb-cf6b-404d-a0e4-c6b9b2e128dc" target="_blank" data-smartkarma-citation="entities:17:1" rel="noopener">Tencent Holdings (ADR) (TCEHY US)</a> rallied in US trading after reporting earnings, pointing to a positive read-through for Hong Kong trading on 14 May.</li>
<li>
Highlights: The US-listed moves point to a positive opening impulse for <a href="https://www.smartkarma.com/entities/alibaba-group-holding-limited" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba (9988 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> in Hong Kong, with potential follow-through into <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH </a> futures.</li>
<li>
Why Read: The note links ADR moves, index weights, futures pricing, and Alibaba’s post-earnings implied volatility reset into one short market update.</li>
</ul>



Context:Alibaba (BABA US) and Tencent Holdings (ADR) (TCEHY US) rallied in US trading after reporting earnings, pointing to a positive read-through for Hong Kong trading on 14 May.

Highlights: The US-listed moves point to a positive opening impulse for Alibaba (9988 HK) and Tencent (700 HK) in Hong Kong, with potential follow-through into HSI and HSTECH  futures.

Why Read: The note links ADR moves, index weights, futures pricing, and Alibaba’s post-earnings implied volatility reset into one short market update.


Alibaba (9988 HK/BABA), Tencent (700 HK/TCEHY) Rally Overnight; HSI Futures Point to Higher Open

Equity Long-Short

Mo Aziz

<ul>
<li>1Q26 beat consensus driven by advertising, gaming, and cloud-related AI demand. AI is already lifting monetisation, engagement, and margins across the ecosystem.</li>
<li>Tencent increasingly resembles an integrated “AI operating system” sitting on top of China’s largest social, payments, gaming, and enterprise ecosystem. The market still underestimates this strategic positioning.</li>
<li>Consensus fair value of HKD724/share implies +56% UPSIDE potential from current share price. Risk reward is compelling, and we suggest to ACCUMULATE </li>
</ul>


1Q26 beat consensus driven by advertising, gaming, and cloud-related AI demand. AI is already lifting monetisation, engagement, and margins across the ecosystem.
Tencent increasingly resembles an integrated “AI operating system” sitting on top of China’s largest social, payments, gaming, and enterprise ecosystem. The market still underestimates this strategic positioning.
Consensus fair value of HKD724/share implies +56% UPSIDE potential from current share price. Risk reward is compelling, and we suggest to ACCUMULATE 


Tencent (700 HK) 1Q FY2026 Review: AI Monetisation Is Arriving Faster Than Expected

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Tencent (700 HK) Top Trades: Bearish Positioning and Long Volatility Dominate

Tencent's multi-leg option strategies show bearish positioning and prevalent long-volatility structures, offering insights into market sentiment...

Gaudenz Schneider

[Quiddity Index] HSI Rebal Results Almost All As Predicted - HK$29bn One-Way

The Hang Seng indices announced review results on Friday. The inclusion/exclusion date is 5 June. Capping is finalised three days before. 14...

Travis Lundy

Tencent (700 HK) - Resilient 1Q26 Earnings Growth Despite AI Investment; Solid AI Progress

The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (>RMB36bn investment in FY26E).

CMB International

Alibaba (9988 HK/BABA), Tencent (700 HK/TCEHY) Rally Overnight; HSI Futures Point to Higher Open

Alibaba and Tencent rallied in US trading after earnings, with HSI and HSTECH futures pointing to a higher Hong Kong open and Alibaba IV resetting...

Gaudenz Schneider

Tencent (700 HK) 1Q FY2026 Review: AI Monetisation Is Arriving Faster Than Expected

Tencent's strong performance driven by AI, with potential for 56% upside in share price. Market underestimates strategic positioning as an...

Mo Aziz

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52-week Range

Market Cap (USDm)

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Dividend (Yield)

Tencent (700 HK) Top Trades: Bearish Positioning and Long Volatility Dominate

​Tencent's multi-leg option strategies show bearish positioning and prevalent long-volatility structures, offering insights into market sentiment...

Gaudenz Schneider

[Quiddity Index] HSI Rebal Results Almost All As Predicted - HK$29bn One-Way

The Hang Seng indices announced review results on Friday. The inclusion/exclusion date is 5 June. Capping is finalised three days before. 14...

Travis Lundy

Tencent (700 HK) - Resilient 1Q26 Earnings Growth Despite AI Investment; Solid AI Progress

The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (>RMB36bn investment in FY26E).

CMB International

Alibaba (9988 HK/BABA), Tencent (700 HK/TCEHY) Rally Overnight; HSI Futures Point to Higher Open

Alibaba and Tencent rallied in US trading after earnings, with HSI and HSTECH futures pointing to a higher Hong Kong open and Alibaba IV resetting...

Gaudenz Schneider

Tencent (700 HK) 1Q FY2026 Review: AI Monetisation Is Arriving Faster Than Expected

​Tencent's strong performance driven by AI, with potential for 56% upside in share price. Market underestimates strategic positioning as an...

Mo Aziz

Tencent's multi-leg option strategies show bearish positioning and prevalent long-volatility structures, offering insights into market sentiment...

Tencent's strong performance driven by AI, with potential for 56% upside in share price. Market underestimates strategic positioning as an...