Structured Warrants
A structured warrant is issued by a third party financial institution, on the shares of an unrelated company, a basket of companies' shares or an index. You can buy the share you want at a fraction of its cost by purchasing a warrant. Like shares, warrants are listed on the exchange. However, their price movement is linked to movements in the price of the underlying share and may reflect magnified gains or losses.
| Feature |
Benefits |
| Gearing |
Structured warrants are usually priced at a fraction of share price. This allows you to trade more warrants than the underlying share for the same investment outlay. Trading warrants therefore, offers benefits of gearing. For instance, a small percentage gain in the underlying share price may lead to a larger percentage gain in the value of the call warrants. Conversely, a fall in the price of the underlying share may lead to a larger percentage loss in the value of the warrants. |
| Unlimited upside but limited downside |
The maximum potential loss to you is the entire warrant price, which is usually a fraction of the share price. The potential gain of a warrant may be unlimited as it depends on the movement of the underlying share. |
| Protects the value |
A put warrant allows you to hedge against a fall in the price of a stock in your portfolio. You are therefore, assured of a minimum value equivalent to the exercise price for the stock in your portfolio. |
| Market Exposure |
Index and basket structured warrants with values linked to the performance of a benchmark index and pre-defined basket of shares respectively, will allow you to gain exposure to a sector or market. This eliminates the need of trading in a market portfolio of individual stocks. |
| Cash Extraction |
By selling existing shares and buying a corresponding number of warrants for a fraction of the share price, you are in fact releasing capital from holding shares and still maintain the same exposure. |
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