- What is the difference between Structured Warrants (“SW”) and company warrants?
- Are American-style SW better than European-style SW?
- How do I take profit if I am holding a European-style (i.e. exercise only at expiry) SW?
- Is shorter tenure SW better than longer tenure SW?
- Does the SW price always go up on listing day?
- Should I hold the SW until expiry?
- Are SW with higher premiums bad?
- When is the last trading day of the SW?
1. What is the difference between Structured Warrants (“SW”) and company warrants?
Generally, SW provides higher leverage than SMF, and does not expose investors to margin calls. There are no additional fees like processing fees, rollover fees, etc. and there is no need to post collaterals to buy SW.
2. Are American-style SW better than European-style SW?
Not necessarily. American-style SW are priced higher than European-SW as American-style SW gives the holder the right to exercise at any time before expiry, whereas European-SW are only exercised on the expiry date.
3. How do I take profit if I am holding a European-style (i.e. exercise only at expiry) SW?
You can buy/ sell SW freely in the exchange just like shares. A good SW issuer will provide liquidity for buyers and sellers to participate in its SW.
4. Is shorter tenure SW better than longer tenure SW?
Longer tenure SW is more expensive because it has higher chances of becoming In-The-Money.
5. Does the SW price always go up on listing day?
Not necessarily. The performance of the SW depends largely on the performance of the underlying asset.
6. Should I hold the SW until expiry?
No. SW is a short term trading instrument. Holding on to the warrants until expiry will erode the capital invested. Unless you have an extremely bullish view on the underlying asset, you should not buy and hold the SW until expiry. If you decide to hold to maturity, it could cause a loss to your warrant trade because of the Time Decay.
7. Are SW with higher premiums bad?
In general, premiums are higher for SW with longer time to expiry and effective gearing levels. You should pick warrants which has sufficient time and effective gearing levels which are in line with your trading strategy.
8. When is the last trading day of the SW?
In accordance with the relevant regulations, the SW will be suspended from trading in the exchange two (2) market days before expiry date. Therefore, the last trading day will be three (3) market days before the expiry date.