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Structured warrants are proprietary instruments issued by a third-party issuer, namely an eligible broker or financial institution that give holders the right, but not the obligation, to buy or sell the underlying instrument in the future for a fixed price. Essentially, you are making a 'reservation' to buy or sell a pre-determined number of the underlying instrument at a certain price in the future when you invest in a structured warrant.
Structured warrants can be issued over an underlying asset such as share, Exchange Traded Funds (ETF), index, a basket of shares or commodities futures
Gives holder right to buy the underlying share at a specified price within a limited period of time.
Gives holder right to sell the underlying share at a specified price within a limited period of time.
CBBC tracks the performance of an underlying stock without requiring investors to pay the full price required to own the actual stock. They are issued either as Bull or Bear certificates with a fixed expiry date, allowing investors to take bullish or bearish positions on the underlying stock with the possibility of an early termination before the expiry date when the underlying moves in contrary direction to investors' expectations.
| Call Warrants | Put Warrants | Callable Bull/Bear Certificates (CBBC) | |
|---|---|---|---|
| Issuer | Eligible brokers or financial institutions | ||
| Underlying Instrument | 1 underlying instrument (share, ETF or index) | 1 underlying instrument (share, ETF or index) | 1 underlying instrument (share, ETF or index) |
| Dilution of underlying shares | No new shares issued | ||
| Expiry Period | 6 months to 5 years | 6 months to 5 years | 3 months to 5 years |
| Expiration date | Fixed | Fixed | Fixed – also possible for early termination when the price/level of the underlying instrument reaches the ‘Call Price’. |
| Settlement price/level at expiry | Shares/ETF:- Closing price 1 market day before expiry; OR 5-days volume weighted average before expiry; OR 5-day average closing prices before expiry Index:- Index closing or average index levels or settlement price of index futures expiring in same month | At expiry:- Shares/ETF:- Closing price 1 market day before expiry; OR 5-days volume weighted average before expiry; OR 5-day average closing prices before expiry Index:- Index closing or average index levels or settlement price of index futures expiring in same month Upon MCE:- Shares/ETF:- Lowest/highest price of the underlying in the next trading session (Main Trading Phase) Index:- Index level expiring in the same month | |
| Settlement method | Delivery of underlying shares or cash | Cash only | |
