Sunday, June 21, 2009

A Beginner’s Guide: Call Warrants Basics

Call Warrants

A call warrant is a leveraged financial instrument which derives its value from the value of an underlying security. A call warrant can provide exposure to the underlying security for a fraction of the underlying securities price.For a physical-settled call warrant, the warrant holder has the right, but not the obligation to buy the underlying security from the issuer at a predetermined price or Exercise Price at expiry or at anytime during the tenure of the call warrant.For a cash-settled call warrant, the warrant holder can exercise at expiry or anytime within the tenure of the warrant to receive a cash payment based on the positive difference between the underlying security price and Exercise Price of the call warrant, adjusted by the Exercise Ratio and any other incidental charges.

Exercise Styles

American - Gives the warrant holder the right to exercise at anytime before or on Expiry Date
European - Gives the warrant holder the right to exercise only on Expiry Date

Expiry Date

The date on which the ability to exercise the call warrants expires.

Taken from CIMB portal.

5.50 pm : Happy Father's Day. Being father giving me sense of responsibilities. I m glad to be a father of my two lovely kids.

I was speaking about Warrants and Call-Warrants with JL last night. I m also a trader when I m free, so I do buy these highly leveraged financial in struments.

Basically, I will like to see myself as 'investors' ... so, FA is significantly important. Putting 80% of my money into stocks with good fundamentals or prospects,I feel 'safe'. But, it is OK to place 20% of my funds playing with these.

If you know-how, you have reduced substantially your RISK and manage to conquer your fears. Nothing could replace experiences, so being NEW to markets and a novice, I definitely have much more to learn.

Here, I will like to thank MANY who have guided me indirectly and rendering supports whenever needed.

Thank You.


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