Guide to Investing in Call Warrants
A call warrant is a derivative-based product that has a fixed tenure (maturity) and, if not exercised, is worthless after its expiry date. Therefore, it is essential to select a call warrant that has sufficient time before it expires to match investment targets.
While a call warrant is traded like a stock, it is not based on the company’s performance but the attractiveness of the company’s stock that is being traded on the stock market. It derives its value from the value of an underlying security stock.
A holder of a call warrant does not have any voting, shareholding or dividend rights. The investor therefore has no say in the management of the company, even though he is affected by any decisions made by the company that impacts the share price of the warrants.
As call warrants are somewhat volatile investment vehicle, it pays to understand some of the terms used.
- “Mother share”: The share on which the call warrant is based. It is also known as the underlying security.
- Expiry date or ex-date: This is a very important date to know, because if you do not redeem your call warrant before or on the expiry date, it ceases to exist.
- Exercise or strike price: It’s the stated price per share for which the mother share may be purchased or sold by the call warrant holder upon exercise of the call warrant contract.
- Settlement types: This means the type of settlement to warrant holders upon maturity i.e. physical-settled or cash-settled.
- Settlement price: This means a reference price determined by the market in which a Call Warrant is converted into cash value.
Latest Warrant in Bursa Malaysia
Bursa Malaysia Warrant Expiry Date
I just updated the warrant detail such as expiry date, conversion ratio, exercise price and etc in the warrant section. Please check it at Warrant Section.
How to choose the right warrant?
A warrant is a derivative instrument whose value is dependent on the underlying stock. Warrants offer investors leverage. Typically, with the same investment outlay, the investor would be able to buy many more times the warrants than if he had bought the underlying stock directly. There are nearly hundred of warrants listed on the Bursa Malaysia and it is common for there to be more than one warrant on each underlying stock. Before deciding on which warrant to invest in, a potential investor may consider the following pointers before taking the plunge in the universe of warrants.
- Know the Product
Investors should understand the dynamics of how the product works and the associated risks before buying any investment. - Have a view on the where the Market is headed
The performance of warrants is tagged closely to the price performance of the underlying stock. An investor with a bullish view on the underlying stock would consider buying a call warrant. - Determine an Investment Target
Any investor may choose to set a deadline for the underlying asset to reach a target price. If the underlying stock fails to reach the target price, the investor should reevaluate his/her positions. Warrants are subject to time value decay and the closer a warrant is to its expiration date, the less it is worth. - Select the best warrant
Every warrant is unique – it has a unique exercise price, maturity date and effective gearing level. Investors should choose a warrant in light of his investment targets and objectives and continually be monitoring his risk/return profile.