To The Moon

Tencent Holdings will release its latest quarterly earnings report on March 19.The market generally expects that Tencent Q4 is expected to achieve revenue of 168.435 billion yuan, a year-on-year increase of 8.53%; The expected earnings per share are 4.553 yuan, a year-on-year increase of 62.21%.

Many institutions are optimistic about Tencent's performance, believing that it will have a solid performance in games, advertising, financial technology and other fields.More than 90% of analysts have given Tencent a "strong recommendation" rating. The average target price of institutions is HK $509, and the highest target price is HK $676.

Looking forward to this performance,Investors are still focusing on the performance of game sector revenue, video account advertising and other high-margin business growth, etc. AI investment layout, latest repurchase guidelines and other aspects are also worthy of attention.

The game business is performing steadily, and revenue is expected to increase by more than 16% year-on-year.

In terms of value-added services, Tencent's game business continues to play a driving role. JPMorgan Chase expects value-added service business revenue to reach 76.61 billion yuan in the fourth quarter, a year-on-year increase of 10.9%.Among them, game revenue is expected to be 47.53 billion yuan, a year-on-year increase of 16.2%.

UBS recently published a research report stating that Tencent's game business is performing steadily, providing a certain degree of visibility into profits. The data shows that Tencent's total domestic game revenue during the Lunar New Year was better than expected, and it is estimated that the year-on-year growth rate will reach double-digit percentages. In addition to the contribution from the focus masterpiece Dungeon & Fighter: Origins, it is also attributed to its existing evergreen games. For example, the flagship game "Honor of Kings" has launched new skin sets at different prices to cater to the needs of different users.

Furthermore,As AI technology accelerates its penetration into the game industry, the industry is undergoing a full-link transformation from research and development to experience.Domestic manufacturers' exploration in AI interactive gameplay, intelligent NPC, dynamic content generation and other fields may set a "wind vane" for the future development of the industry. Tencent updated its self-developed voice command FPSAI teammate-F.A.C.U.L. in "Dark Zone Breakout", and integrated DeepSeek technology in "Peace Elite" to enhance the authenticity of human-machine collaboration in tactical confrontation scenarios.

In view of the upcoming Tencent financial report, investors can use the wide straddle strategy to trade.

What is the wide straddle strategy

In long wide straddle options, investors buy both out-of-the-money call options and out-of-the-money put options. The strike price of a call option is higher than the current market price of the underlying asset, while the strike price of a put option is lower than the market price of the underlying asset. This strategy has significant profit potential because the call option theoretically has unlimited upside if the price of the underlying asset rises, while the put option can make a profit if the price of the underlying asset falls. The risk of the trade is limited to the premium paid for these two options.

An investor shorting a wide straddle sells an out-of-the-money put and an out-of-the-money call at the same time. This approach is a neutral strategy with limited profit potential. Shorting a wide straddle option is profitable when the underlying stock price is trading within a narrow range between break-even points. The maximum profit is equal to the premium obtained by selling two options minus the transaction cost.

Tencent's short-selling wide straddle strategy case

Tencent is currently trading at HK $541. Investors can implement the short wide straddle strategy by:

Sell a call option with an exercise price of HK $580, and premium is HK $337.

Sell a put option with an exercise price of HK $500, and premium is HK $130.

Strategy Building

• Sell HK $580 call option→ RevenueHK $337

• Sell HK $500 put option→ RevenueHK $130

• Total Options premium Revenue= 337 + 130 =HK $467

• Maximum profit=HK $467(share price between HK $500 and HK $580 at maturity)

PROFIT AND LOSS

Profitable area：

• When Tencent's stock price isHK $500 to HK $580Between, neither option will be exercised, and investors can completely retainHK $467Premium as profit.

Loss area：

• WhenShare price above HK $580：

  • The call option is exercised, and the investor needs to sell the stock at HK $580 and bear the loss.

• WhenShare price below HK $500：

  • The put option is exercised, and the investor needs to buy the stock at HK $500 and bear the loss.

Break-even point

• Above break-even point= 580 + 4.67 =HK $584.67

• Break-even point below= 500-4.67 =HK $495.33

• The stock price is between HK $495.33 and HK $584.67, and the strategy is profitable; Loss if it is out of range

Risk and reward

• Maximum profit is limitedButLosses are theoretically unlimited, suitable for markets with stable trends.

• Risk is greater when volatility rises, hedging measures (such as buying protective options) need to be considered.