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Structured Warrants
Warrant is an option that gives the holder the right but not the obligation to buy or sell an underlying security at a specific price (exercise price) on or before a predetermined date (maturity date).
Warrant allows investors to benefit from a leveraged participation in the underlying securities without having to buy the underlying securities. This may be issued from a range of underlying securities including equities, indices, commodities and currencies.
There are two types of warrants in the market:-
| Company Warrant |
| This warrant is issued directly by listed companies and is exercisable into their own shares. This results in share dilution. |
| Structured Warrants |
| This warrant is usually issued by a third party; i.e. investment bank, universal broker and financial institution. There will be no dilution effect in the end of the exercise. |
Some features of structured warrants:-
| Call warrant
| | A call warrant gives the holder the right to buy a given quantity of the underlying security at a predetermined price, on or before a specific time. |
| Put Warrant |
| A put warrant gives the holder the right to sell a given quantity of the underlying security at a predetermined price, on or before a specific time. |
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| Warrants have a fixed tenure; if not exercised, are worthless after their maturity date. |
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| European Style |
| The warrant holder can only exercise his/her right on a given date i.e maturity. |
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| American Style |
| The warrant holder can exercise his/her right at anytime before and on maturity. |
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This Information sheet is provided to you for information only and should not be considered as investment advice or any form of recommendation to purchase or sell any warrants.
The price of warrants may fall in as value as rapidly as it may rise and you may sustain a total loss of your investment. You should therefore ensure that you understand the nature of the warrants and, where necessary, seek advice before you invest in any warrants.
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