For an investment that wants to make a warrant transaction, you can first establish the basic concept of the warrant operation.
1. To operate the warrants, first understand the three characteristics of the warrants.
2. What is the warrant?
3. Operating warrants must understand your counterparty: self-employed
4. When should I use a warrant transaction?
5. How to buy the warrants?
To operate the warrants, first understand the three characteristics of the warrants.
A warrant is a derivative commodity that has three main characteristics:
Features 1. Ability to control a stock with less capital
In other words, there is a relatively large leverage, similar to the concept of small and big.
Feature 2. Can do more or short
Short selling of warrants is the sale of securities-like securities, which are sold first, then bought, and when they fall, they profit and increase losses. Stocks have more restrictions on securities lending, which involve issues such as opening a letter to the user, insufficient voucher sources, and suspension of securities. However, there is no such restriction on the use of warrants.
Features 3. Limited loss, similar to lotto
General stock investment, the average annual return rate of 10% is very good, through the warrants trading, the profit may be 50% or even 500%, but the loss may also lose 100% of all losses, this feature is similar to the lottery .
Therefore, when operating the warrants, you will not invest too much money each time, just as you will not buy all the lottery to buy lottery.
What is the warrant?
The nature of the warrant is similar to that of the buyer of the option. It is a "voucher that can buy and sell stocks at a specific price in the future."
This is not the same as buying stocks. The stock is simply bought and sold, but the warrants must be added with time (expiration date) and agreed price (performance price).
To give a simple example of warrants:
After 3 months, you can buy 500 shares of TSMC with a stock price of 250 yuan.
After 2 months, you can use the stock price of 260 yuan to sell (short) 1000 shares of TSMC.
Such a contract can be called a warrant.
A voucher is a contract meaning that the contract contains the following elements:
1. Subject : Stocks corresponding to warrants
2. Subscription/sell : The subscription can be bought when it expires, and the subscription can be emptied when it expires.
3. The strike price : the price at which it will be bought or emptied, if there is any ex-rights or increase , capital reduction will be adjusted according to the ratio
4. Exercise ratio : 1 ratio of the exercise time, representative of an expiration can buy a ticket stock; exercise a ratio of 0.5 times, representing an expired ticket stock can buy 0.5
5. Expire Date : The expiration date, but usually we are more concerned about how many trading days are due, because there are only 10 days left and 60 days left, the stock price may vary by a different amount.
For example:
1 TSMC warrant, 3 months later can buy 500 shares of TSMC with a stock price of 250 yuan, then its warrants information will be like this:
- Target: TSMC (2330)
- Subscription / Subscription: Subscription – because At the time of expiration, you can buy
- Reward price: 250 yuan
- Exercise ratio: 1 warrant can buy 500 shares, the corresponding ratio is 0.5 times
- Due date: 2019/04/18 (assuming 3 months later It is this time)
Operating warrants must understand your counterparty: self-employed
Warrants are issued by major self-employed Since the warrant is a contractual voucher, there must be a counterparty to the transaction, and the regulations stipulate that a qualified dealer can issue a warrant. The main profit of the self-employed is the handling fee and time value.
For publishers, the main income is the transaction fee from the caller of the warrant . When the investor trades the warrant, the issuer usually avoids the potential loss when the stock rises and falls.
In addition, there is also the return of time value, the meaning of time value is that as the maturity date is close, the size of the warrant may fluctuate gradually, and the fluctuation becomes smaller, the profit potential of the warrant becomes smaller, so the warrant The value will be reduced, and the warrants can sell the warrants at a high price at the time of issuance.
Self-employed companies have the responsibility of making a market, but they also control the price of warrants.
The main cost of the issuer is to hire professional traders to monitor and market the liquidity, including some of which will increase a lot when the warrant expires. This part of the loss will be offset against the time value.
Imagine if you sell a product, the price is controlled by you, can you make yourself lose money? Moreover, the self-employed business itself has some costs to bear.
For all derivative goods, as long as there is one buy and sell, both sides are usually zero-sum games. For the warrants, if the person who buys the warrants makes money as a whole, the person who sells the warrants is bound to lose money.
This is not to tell you not to buy a warrant, but to understand the innate characteristics of the warrant first.
In the past, Mr. Market once wrote an article that mentioned that investment novices do not want to trade warrants . The reason is that the characteristics of warrants are more complicated, and it is easy for newcomers to suffer if they are not familiar with them.
But this is not to say that the warrants are not good.
I think that warrants are a tool, any tool has its characteristics, but the tool itself has no good or bad, only the difference between the user's use and the timing of the use.
At the right time, using the warrants operation will have a much better effect than stocks.
When should I use a warrant transaction?
You should not trade warrants for less money. Generally speaking, when selling a warrant, you often hear a sentence called: Qian Shao can also trade warrants. Because the warrants are usually bought and sold for a small amount of several thousand yuan.
Mr. Market itself does not like this marketing word very much. If you think about it, you will not buy more lottery because of less money. The same reason, money is not the reason for trading warrants.
Timing for operating warrants: Expect large fluctuations in the short period of time to come
For example, if you think that the US presidential election in the future, the stock market is likely to be affected by the ups and downs, but you don't know whether it is up or down, or you think there is a higher chance than usual.
At this time, the characteristics of the warrants: high leverage, limited losses, can maximize the effect.
When you guess the right, you get huge income. If you make a mistake, you have a limited loss. If you use stocks, you can't get a similar effect.
In the same way, there are still many opportunities for volatility amplification. This is left to your own exploration. In the future, Mr. Market will also share some statistics.
Warrants myth: Really limited losses, unlimited profits?
Many promotional slogans will say that the warrants are "limited losses and unlimited profits"
However, in fact, the profit cannot be unlimited, because each warrant has a corresponding stock target. The stock price has a limited range of stock price changes for a period of time, and if no one speculates on the price, there is no market panic, and the company’s business is also Not much change, the stock price change is usually not too big.
Warrants do not hold for a long time
Because the value of warrants will continue to decrease over time, you should generally avoid long-term warrants unless there is a large enough opportunity to wait.
How to buy the warrants?
Warrants can be bought through stock brokers, and the warrant code can be entered. If you have not yet opened a stock account, you can read:
- How to open a stock investment securities account?
- How do I talk about the handling fee when opening an account?
- Latest stock brokerage account opening fee discount
Warrants are more relevant to the right to choose.
If you are interested in warrants, you can spend more time understanding the options, and follow-up will be sorting out some related teaching.
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