ASX Traded Warrants - A New Investing Alternative

The 1990’s saw a dynamic financial market become established in Australia offering concepts that were innovative for private investors. The growth in the use of warrants and the development of warrant concepts continue to create a new investing alternative for personal investors.

What are warrants?

Warrants are a form of derivative giving holders the right to buy or sell the underlying instrument to the warrant issuer for a particular price according to the terms of issue.

Common Advantages and Characteristics of Warrants

• Leverage or Gearing Exposure to the Market, Currencies or Individual Shares
• Speculators can take short term positions with Small Capital Exposure
• Some warrants enable Investors to Benefit from reduced capital outlay while receiving FULL DIVIDENDS and voting rights.
• Warrants can be used for hedging purposes
• Risk is limited to the price paid for the warrant
• Warrants can be Investment Type or Speculative. Traders can make profits if a share price falls through certain levels by buying PUT WARRANTS. If the market goes up and not down as expected losses can occur.

How do warrants differ from options?

Warrants and options premiums are both determined by an underlying asset. The main differences between warrants and options include:

• Warrants are traded via SEATS while options are traded on the Derivative Trading Facility
• Options terms are standardised and set by ASX, whereas warrants terms are set by the issuer and vary from one warrant to another
• Warrants are issued by a third party, such as a bank, while options are listed by OCH (options clearing house)
• Warrant holders are exposed to the credit risk of the issuer, while OCH guarantees the performance of options contracts

How are warrants prices determined?

Warrants prices are determined by intrinsic value and time value. Intrinsic value is the difference between the exercise price of the option and the market price of the underlying shares at any given time. Time value is influenced by time to expiry, market volatility, interest rates, dividend payments and market expectations.

How can I find a properly qualified broker to assist me in warrants trading?

We are accredited ASX Level 2 Derivatives advisors and can advise and assist on any Warrant Strategy for your investment needs.

How do I open a warrants trading account?

By simply calling 1800 732 525 to set-up an account over the phone, or by
completing and signing the Client Agreement for Warrants form.

CK Locke and Partners utilise Sanford Securities (ACN 076 515 930) a member of the ASX and Licensed Securities Dealer as the Clearing Broker and Full ASX Participant.

For More Information

Warrants Simple Guide