1. What is the difference between an Issuer or Market-Maker or Liquidity-Provider?

Issuer: Provides price guidance and facilitates price discovery. Issuers price a warrant using option pricing models i.e. Black Scholes or Trinomial pricing models. 

Market-Maker/Liquidity-Provider: Provides liquidity by offering Bid/Offer Volume on both Bid/Offer Price.

2. If I “win”, won’t the Issuer “lose”?

No, the Issuer will not lose because Issuers engage in a win-win strategy. When investors buy warrants, the Issuer hedges the position by buying the underlying shares. If the underlying and warrant goes up, traders profit from warrants whilst the Issuer profits from underlying shares.

3. How do Issuers choose which underlying to issue warrants on?

At Kenanga, we issue Structured Warrants following market demand and Bursa’s Listing Requirements. This means the underlying share must have
1.  Average daily market cap of a least RM 500 million track record, in the immediate past 3 months
2.  or RM3 billion for a newly listed corp.

4. What are the 3 ways Issuers make money?

Issuers profit from an assortment of ways which include time value decay, hedging their positions, bid-ask spreads and more. 

5. During the Rubber Glove rally, did Issuers lose money?

No, us Issuers are on the same side as traders & Issuers always hedge their positions.
We believe in a win-win outcome.