A warrant is a security that entitles, but does not oblige, its holder to buy (call warrant) or sell (put warrant) an asset (underlying asset) at a given price (exercise price) on a predetermined date (european exercise) or by that date (american exercise).
There are two main types of warrants:
- Call warrants: Financial instruments that entitles the investor to buy an underlying asset. They are generally acquired by buyers expecting a rise in the asset's value.
- Put warrants: Financial instrument that entitles the investor to sell an underlying asset. Generally acquired by those who expect the asset's value to fall at a given moment.
Trading in warrants is very similar to trading in equities. Go to Trading and Markets > Warrants, and choose the several options available: buy, sell, quotes, etc.
No. You can buy warrants using the same account number you use to trade your equity portfolio.
The ticker of a warrant comprises the following elements sequentially: underlying asset, call/put, exercise price, expiration date and the issuer.
For example, the ticker EDP C 2,00 12-03/SG, means:
- Underlying asset - EDP.
- Call/Put - CALL.
- Exercise price - €2.00.
- Maturity - December 2003.
- Issuer - Société Générale.
It is always better to sell the warrants on the market rather than exercise them. On exercising a warrant the investor receives only the intrinsic value, thus abdicating from the whole of the time value. On the contrary, selling on the market the investor gets the whole of the value of the warrant (intrinsic value + time value).
- Price of the underlying asset.
- Time until maturity.
- Dividends and interest rate.
- The underlying asset analysis.
- The selection of the most suitable warrant (Delta, Maturity, Liquidity, Vega and Theta).
- Admission to Listing Brochure consultation.
- Daily follow up of your warrant evolution.
- Invest in warrants no more than 10-15% of your portfolio.
- Establish limits for profit taking and stop loss.
- Exercise prices do not provide any type of information on the evolution of the underlying asset price.
- Analyze the possibility of selling the warrants before maturity.
Any order inserted in Banco Best site by a Customer is, in a matter of seconds, sent to the chosen asset’s market to be executed. Depending on the type of order (best limit price, etc.) it will be executed in that market according to its own rules, regulations and laws.
In the case of international markets orders may, alternatively, be executed against the investment portfolio of the financial intermediary chosen by Banco Best to operate in that market, this way ensuring the minimum price of the one practiced in the relevant market.
When the order is executed at the stock exchange you may consult the detail of each allocation in the orders history, where there is information on the amount executed, as well as on price and time (GMT). This information may also be consulted in “Terms of your Exchange buying” and “Terms of your Exchange selling”.