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Wen/Wu Jia
The implementation of the split share structure reform has brought investors not only the profits of non tradable major shareholders' share giving, but also the warrants, a kind of trading product that has appeared before, with new trading rules for investors to trade.
On August 22, 2005, Baosteel's call warrants were listed for trading, and the opening price was directly sealed at the ceiling,
This shows that investors are in pursuit of warrants and excessive speculation. With the gradual progress of the split share structure reform, some qualified enterprises have introduced the warrant delivery as part of the share reform plan or completely. In the case of more and more warrants, investors have more choices and more opportunities to make profits, but the risks also appear. For investors who want to play a role in warrants, this paper provides some relevant knowledge and operational suggestions, as well as analysis of individual warrants, for investors' reference.
Several Concepts of Warrants
Warrants are securities issued by the issuer of index securities or a third party other than the issuer, and the agreed holder has the right to purchase or sell the underlying securities from the issuer at the agreed price within the specified period or on a specific maturity date, or to collect the settlement difference by cash settlement. According to the time of exercising rights, it can be divided into European style warrants, American style warrants and Bermuda style warrants. The European style warrant stipulates that the holder has the right to exercise only when the agreed time arrives, while the American style warrant allows the holder to exercise the right of the warrant at any time before the agreed time arrives, while the exercise period of the Bermuda style warrant is not every day, nor one day, but a period of time, Namely, the warrant investors can exercise the right conferred by the warrants within a period of time.
According to the different exercise rights of trading, it can be divided into call warrants and put warrants, also known as call warrants and put warrants. The call warrant holder has the right to buy the underlying securities from the issuer at the agreed price within a specific period or on the maturity date, and the put warrant holder has the right to sell the underlying securities.
The call warrant scheme gives the circulating shareholders the right to purchase the shares of non circulating shareholders at a lower exercise price by issuing the warrant to the circulating shareholders. The put warrant scheme is issued by the listed company or major shareholder to the shareholders of tradable shares. The protection of the interests of the shareholders of tradable shares is reflected through the exercise price of the warrants. The product of the exercise price and the number of shares of tradable shares is the income of the shareholders of tradable shares in the whole circulation process.
A brief analysis of the difference between put and warrant
(1) The risk of the "positive shares+warrants" portfolio is different. Due to the different sensitivity of call warrants and put warrants to positive shares, the price of call warrants will rise and the price of put warrants will fall as the stock price of positive shares rises. From the perspective of the sensitivity of the "positive shares+warrants" portfolio, the call warrants will aggravate the systematic risk of the portfolio, while the put warrants will hedge part of the risk of the fluctuation of the positive share price.
(2) The compensation for current shareholders is different. When the stock price of regular shares falls, the price of put warrants rises, which will compensate the losses of current shareholders, thus reducing the break even point of current shareholders; The warrant can give the holders of tradable shares a share in the possible future performance growth. However, if the share price is discounted, they will not be compensated much in the short term.
(3) . The value at maturity is different. Since the warrants included in the current share reform plan are delivered by stock settlement, this will have a significant impact on the maturity value of the warrants. For put warrants, if the warrants are in the money when they are about to expire, that is, if the share price is less than the exercise price, the holders of the warrants will inevitably buy positive shares in order to exercise, and the buying pressure may make the share price close to the exercise price, thus making the warrants lose value; For the warrant, if it is in the money, the holder only needs to prepare cash to buy shares from major shareholders at the exercise price, without affecting the share price of the outstanding A shares. However, after the exercise, the number of tradable shares in the market suddenly increased. If investors want to make profits as soon as possible, the positive shares will suffer short-term selling pressure, and the stock price will inevitably fall again, causing losses to investors.
(4) Put warrants allow investors to build a variety of investment portfolios, while call warrants can only become a tool for speculators to speculate in the absence of short selling mechanism in the market.
For the creation mechanism of warrants, the price of warrants mainly depends on the price of the underlying stock market and its volatility, and its price should not be completely affected by the supply and demand relationship. When the market demand rises, there should be some mechanism to allow the supply of warrants to increase in due course, so as to stabilize the price boom. The mature overseas warrant market has used this "continuous offering" mechanism without exception. For this reason, Article 29 of the Interim Measures stipulates that qualified institutions can create warrants to increase the supply of warrants in the secondary market and prevent the price of warrants from soaring out of the reasonable price area.
Analysis of investment operation of warrants
Xu Xianghua, manager of Beijing Business Department of First Venture Securities, is a veteran of the stock market. He has unique insights and analysis on the operation of warrants. President Xu's most emphasized principle is to operate in the process of warrant speculation based on the idea of combining moderate investment with moderate speculation. Because, under the condition of pure investment awareness, the value analysis will deviate from the full positive itself, because the value of warrants is more dependent on the positive shares, and the value analysis of stocks can be supported by performance, but warrants will also be affected by the contradiction between price and supply and demand. Pure speculation is also not suitable. In order to obtain rich returns in speculation, the risk is often quite large. After all, stocks can fall by 10% at most in a day, but warrants may fall by more than 20% within 10 minutes. Therefore, each investor should allocate his/her investment and speculation proportion based on his/her appropriate amount of capital and maturity, and adjust it according to the overall situation in a timely manner. After the operation concept of warrants has divided the margin of safety, there should be a benign operation process, that is, after seeing an appropriate percentage of benefits, you should sell them in time, especially in combination with the trend of positive shares and the expected price. For warrants with large trading volume every day, investors also need to pay attention to other investors who want to buy and sell warrants. Because investors who can do warrants are risk averse and more or less gambled, so they can't simply look at the risk level. At one time, they need to stop losses quickly to make adequate preparations for subsequent operations. In terms of technical indicators, General Manager Xu also mentioned that taking the 15 minute K line chart as the standard is more suitable for the purchase and sale of warrants. Combining the shorter time K line chart to find the high and low points will reduce the cost of building a position and increase the income obtained when selling. He finally mentioned a very important point that warrants are not suitable for operating under the DCA rule. Maybe in the next few months, the warrant market will once again become more popular after Baosteel's warrants can be exercised at zero value. Of course, this is just speculation, and does not represent the real market results.
(Author First Venture Securities)
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