Trading Warrants for Growth Seekers
What are structured warrants? [Part I]
thewarrantmaster
Publish date: Mon, 24 Aug 2020, 03:12 PM
thewarrantmaster
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Many deemed trading warrants as a risky move, but as Warren Buffet once said: "Risk comes from not knowing what you're doing."
This blog section is written to help traders understand more about warrants, especially for the growth seekers.
This blog section is written to help traders understand more about warrants, especially for the growth seekers.
Amid pandemic, more Malaysians are opening a CDS account and joining the scene. On 11th August 2020, last Tuesday, Bursa Malaysia hits another record high of 27.8 billion shares in volume worth RM7.8bil.
Whatever the reasons maybe for you to join the stock market, be it for the additional income stream or to achieve financial freedom, it's important to know what you’re doing and equip yourself with the appropriate knowledge.
Every investor, new or experienced, has different goals and approach to achieving them depends on your risk and return appetite.
Here, I would like to write about introduction of structured warrants, which are suitable for investors who are seeking for high capital growth, with high risk appetite. Investors can leverage your investment exposure at a fraction of the price (underlying) by trading warrants.
I am sure many new investors are curious and have been exposed to warrants of the glove counters. For example: Harta-Cxx (Call Warrant), Supermx-HB (Put Warrant) and etc.
So, what are structured warrants?
They are instruments issued by a third-party issuer, for example: CIMB, RHB, Macquarie and etc, that give holders the right, but not the obligation to buy or sell the underlying instrument in the future for a fixed price when certain conditions are met. They offer an alternative avenue to participate in the price performance of an underlying asset at a fraction of its price, in both directions (bullish and bearish).
Types of structured warrants?
Call Warrants
- holders benefit from upside price movements in the underlying asset.
Put Warrants
- holders benefit from downward price movements in the underlying asset.
Features of a structured warrant?
Type: Call Warrant or Put Warrant
Listing Date: 30 Jun 2020
Maturity Date: 26 Feb 2021
Issue Size: 100,000,000
Exercise Price: MYR 10.00
Conversion Ratio: 10:1
Underlying Stock: ABC
Exercise styles: European or American
Settlement method: Underlying instrument or Cash payment
Not all warrants are made equal.
These are the details of a warrant. From here, we can deduce the premium, effective gearing, delta (%), sensitivity, break-even price at expiry, implied volatility (%), theta (%), and moneyness, factors of which would make one warrant better than the other.
The next Part of this topic, I will further elaborate the features and terms of a warrant. Stay tuned!
Thank you. -thewarrantmaster
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"Risk comes from not knowing what you're doing."
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Created by thewarrantmaster | Sep 13, 2020
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