权证
Trading Warrants
Warrants gives the holder the right but not the obligation to purchase securities from the issuer at a specific price within a certain time frame.
Benefits
- Lower capital outlay with leverage
- No margin call
- Ability to go long or short
- Limited Loss – maximum potential loss is limited to the total amount paid for the warrants, which is a fraction of the underlying asset
- Transparent and flexible – listed and traded on the exchange, allowing investors to buy and sell warrants like shares
- Diverse market access as some index and basket warrants give investors exposure to a sector or a market, eliminating the need to trade individual stocks in a market portfolio
- Liquidity
Risks
- Leverage is a double-edged sword where losses can be magnified when the value of the underlying asset moves against the warrant position
- Credit risk – this occurs when warrants are exercised but the warrant issuer is unable to fulfill its obligations
- Extraordinary event – the warrant issuer may declare a lapse of the warrant or bring forward the expiry date
- Limited lifespan – unlike the underlying asset, warrants have expiration dates and investors holding onto warrants that expire at-the-money or out-of-the-money will lose their investment capital
- Issuer risk – warrant holders have no preferential claim to any assets that an issuer may hold in the event that they are unable to fulfill their obligation
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