CBBC is also a leveraged derivative product with an expiry date. The main difference between it and warrant is that CBBC has a Call Price and a mandatory call feature. That means CBBC can be knocked out (or called Mandatory Call Event) when the underlying price reach Call Price before expire. If CBBC has not been knocked out, they can be traded until expired.

The full name of CBBC is “Callable Bull / Bear Contracts”. If investors are optimistic about the market or predict stock prices will rise, they can choose Bull. If they expect stock prices will fall, they can buy Bear. Currently, issuers launch CBBCs with underlying of local indices, blue chips, and ETFs.

CBBCs have call price. If the underlying price fall to/ below call price before expires, the Bull Contracts will be knocked out, and suspend trading. If the underlying rise to/ above call price before expires, the Bear Contracts will be knocked out, and trading will be suspended.

CBBCs can also be divided into N and R-type. Once knock out, N-type CBBCs have no residual value, and R-type may have residual value. The residual Value is depended on the difference in underlying price & strike price of the CBBC; it may fall to zero. In HK, most CBBCs are R-type.

Although the CBBC has the mandatory call feature, it's pricing methodology is simpler than the warrant. Theoretical price of CBBC is mainly affected by the underlying price, and other factors that affect theoretical price include the date to expire, interest rate, dividend and market supply/ demand. The theoretical value of CBBC consists of an intrinsic value and "financial expense". The higher the financial cost, the higher the theoretical price of CBBC.

Warrants & CBBCs are structured products that are not suitable for all investors. Therefore, it is important to know the risks before investing. The investor should consider their financial endurance if "worst case" happened. In fact, “Listing documents of the Warrants & CBBCs” and "Frequently Asked Questions - Hong Kong Listing Warrants and CBBC Markets" (19 August 2016) issued by the HKEx listed the main risks as followed:

• Non-collateralisation - Warrants and CBBCs are not secured by any asset of the issuer or the guarantor (if any) or supported by any other collateral
• Credit risk - Holders of warrants and CBBCs are unsecured creditors of the issuer and the guarantor (if any) and they have no preferential claim to any assets that an issuer or a guarantor (if any) may hold.
• Gearing risk - Although warrants and CBBCs often cost less than the underlying assets, a warrant or CBBC may change in value to a much greater extent than the underlying assets. Although the potential return on warrants or CBBCs may be higher than that on the underlying assets, in the worst case the value of warrants or CBBCs may fall to zero and holders may lose their entire investment amount.
• Limited life - Unlike stocks, warrants and CBBCs have an expiry date and therefore a limited life. Unless the warrants or CBBCs are in-the-money, they become worthless when they expire.
• Time decay - So long as other factors remain unchanged, the time value of warrants or funding costs of CBBCs will decrease over time and will become zero upon maturity.
• Market forces - In addition to the basic factors that determine the theoretical price of a warrant or CBBC, prices of warrants or CBBCs are also affected by the demand for and supply of the warrants or CBBCs.
• Turnover ‐ High turnover should not be regarded as an indication that the price of a warrant or CBBC will go up. The price of a warrant or CBBC is affected by a number of factors in addition to market forces, such as the price of the underlying assets and their volatility, the time remaining to expiry, interest rates, and the expected dividend on the underlying assets.
• Possibly limited secondary market - The liquidity provider may be the only market participant for a particular warrant or CBBC. The more limited the secondary market, the more difficult it may be for you to realise the value in the warrant or CBBC before expiry.
• Operational and technical problems are affecting liquidity services – The liquidity provider may not be able to provide liquidity when there are operational and technical problems hindering its ability to do so. Even if the liquidity provider is able to provide liquidity in such circumstances, its performance on liquidity provision may be adversely affected. For example:
  i. the spread between bid and ask prices quoted may be significantly wider than its normal standard;
  ii. the quantity for which liquidity will be provided by the liquidity provider may be significantly smaller than its normal standard; and
  iii. the liquidity provider’s response time for a quote may be significantly longer than its normal standard.
• Corporate action of the underlying stocks – Corporate actions affect the value of the underlying stocks which in turn affect the value of the warrants or CBBCs. Adjustments may or may not be made to the terms of the warrants or CBBCs (such as entitlement ratio, exercise price, etc.) depending on the terms and conditions set out in the listing documents. Where adjustments are to be made, the adjustments will only become effective (the “Effective Date”) when all necessary parameters can be determined. The prices of the warrants or CBBCs may be volatile from the ex-entitlement date of the underlying stocks until the Effective Date. You should exercise particular caution in trading those warrants and CBBCs during that period. In addition, no adjustment will be made to those warrants and CBBCs that expire within that period.