Guide for the More Experienced

The outstanding quantity increases when there is a money outflow recorded for bulls?
  • Many CBBC investors will refer to the CBBC’s outstanding distribution chart or money flow to observe other investors' orientations in the market. However, if only one single data is considered, under certain market conditions, conclusions inconsistent with the facts may be drawn.
    For example,
    when the HSI surged by 500 points one day, and bulls then recorded a money outflow, there may be investors who hastily made a conclusion that "the market may not rise again, so investors should sell long positions to take profits immediately if it is profitable”. Maybe investors who are selling CBBCs do have such an idea, but the truth needs to be illustrated by an outstanding distribution chart.
    If the outstanding distribution chart shows that the overall outstanding quantity of bulls decreases when there is a money outflow from bulls, the idea of “profit-taking” may be initially justified; but if the overall outstanding quantity of bulls is more or less the same or it even increases when there is a money outflow from bulls, the truth may be that investors are not fully “taking profits”, but only partially “switching CBBCs”, that is, selling bulls with further call levels and higher prices and switching to bulls with closer call levels and lower prices in order to continue to benefit from the further rise in prices in the market using a small amount of fund, which causes a phenomenon of “money outflow from bulls”. The outstanding distribution chart also shows the increases and decreases in outstanding quantities within different call ranges to provide investors with a more comprehensive picture.
    Therefore, investors should not observe one single data and should consider the outstanding distribution chart and money flow together, so as to draw a conclusion that can better reflect the true intention of investors.
  • Similarly, there may be a deviation arising from only observing outstanding distribution chart to observe investors’ orientations. In certain market conditions, conclusions inconsistent with the facts may be drawn.
    For example,
    If the HSI fell by 500 points one day, the bull's outstanding ratio changed from 55:45 to 52:48
    and the equivalent number of futures contracts for bull's outstanding quantity also changed from approximately 7000 to 6500, there may be investors who hastily made a conclusion that “it is necessary to stop loss for long positions immediately when stock prices fall in the market”. Is it true?
    Don't forget that there is a call mechanism for CBBCs. The dramatic decrease in bull's outstanding quantity when stock prices fall in the market may be due to the call-back of CBBCs in certain ranges instead of stop loss for long positions. There is a more concrete evidence showing a greater possibility of “stop loss for long positions” only when the outstanding quantity decreases and there is an obvious money outflow. If the outstanding quantity for long positions decreases but no obvious money inflow or outflow is observed, “stop loss for long positions” is only a beautiful misunderstanding.
    The above example once again proves that investors should consider the outstanding distribution chart and money flow together, so as to draw a conclusion that can better reflect the true orientations of investors.
Consolidate your memory immediately!
Say Tencent's stock price rises, the money outflow of bulls and the decrease in the outstanding quantity may reflect that investors are “taking profits”. If money flows out of bulls and the outstanding quantity does not change or even increases,
it may reflect that investors are
Correct!
If the outstanding quantity does not change or even increases but there is a money outflow recorded for CBBCs,
it may be due to the fact that investors sell the products with further call levels and switch to bulls with closer call levels and lower prices.
Wrong!
If the outstanding quantity does not change or even increases but there is a money outflow recorded for CBBCs,
it may be due to the fact that investors sell the products with further call levels and switch to bulls with closer call levels and lower prices.