Collection of Warrant Questions and Answers

Concept

1. What are call warrants and put warrants?

Answer: The characteristics of call warrants and put warrants are shown in the table below:

2. What factors mainly affect the change of warrant price?

Answer: As a derivative product, the value of warrants is mainly affected by their underlying securities.

The following five factors are the main factors affecting the value of warrants:

Price of underlying securities

Volatility of underlying securities

Time from warrant expiration date

interest rate

Expected dividends of the underlying securities

With other factors unchanged, the impact of each factor on the call and put warrants is summarized in the following table:

3. What are the advantages of investment warrants?

Answer: The investment warrant has two main advantages: first, it can determine the maximum risk of investment

Example 1: Using warrants to lock risks

Compare three portfolios of 1000 yuan:

(1) 1000 yuan national debt: obtain fixed income, but can't enjoy the rising stock income;

(2) 1000 yuan stock: you have the opportunity to enjoy the gains of stock price rise, but the biggest loss may be all investments in stocks;

(3) 900 yuan of national debt+100 yuan of warrants: it can not only obtain fixed income, but also retain the opportunity to enjoy the rising stock income; The maximum loss is limited to the total cost of the investment warrant (100 yuan).

Example 2: High leverage of warrants

Assume that the exercise price of the warrant of stock A is 8 yuan. Compare the earnings of the winning stocks and warrants in Table 1.

Table 1

4. Compared with stocks, what risks do warrants have that investors should pay special attention to?

Answer: Warrants are a financial product with high risk. Investors need to pay attention to the following risks:

1) The timeliness risk that the expiration value of the warrant is zero: the warrant has a certain period, and the holder should exercise the right in the consideration on or before the expiration date in time, because the warrant will have no value after the expiration;

2) The risk of significant fluctuation of warrant trading price: since the warrant is a highly leveraged product, its price only accounts for a small proportion of the price of the underlying securities, the warrant price may fluctuate violently;

For example, the closing price of warrants on a certain day is 2 yuan, and the closing price of underlying stocks is 10 yuan. The next day, the underlying stock fell sharply to the limit price of 9 yuan. If the warrant also fell, according to the regulations, the limit price of the T day warrant was 2 - (10-9) × 125%=0.75 yuan. It can be seen that the underlying stock fell by 10% in one day, while the warrant fell by 62.5%, much more than the stock.

Of course, on the other hand, warrants may also rise more than stocks.

3) The performance risk of the warrant holder's failure to exercise upon expiration: the warrant is in essence a contractual relationship between the issuer and the holder. Although the Exchange has specified certain conditions for the issuance of warrants, the issuer may still be unable to pay the agreed securities or cash to the warrant holder on the maturity date for various reasons. This situation belongs to the issuer's breach of contract, and the warrant holder may investigate the warrant issuer's liability for breach of contract in accordance with the provisions of the warrant issuance prospectus and the listing announcement.

As an investor, you must fully understand the warrant products and their risks before participating in the trading of warrants.

Transaction

5. Where can I trade warrants?

Answer: Investors can buy and sell warrants in the business department of the securities company with the membership of the Exchange recognized by the Exchange. If the business department is unable to trade warrants as an agent, it may be that the qualification of the business department to trade warrants is limited, please contact the broker for confirmation.

6. What preparations should be made at the securities firm before warrant trading?

Answer: Before buying and selling warrants, investors should understand the relevant business rules and possible risks at their securities companies, and sign the risk disclosure statement uniformly formulated by Shanghai Stock Exchange. Only after signing the risk disclosure statement can investors conduct warrant trading.

7. How to trade warrants?

Answer: The trading of warrants is similar to that of stocks. Investors can buy and sell warrants by entering information such as account, warrant code, price, quantity and trading direction through declaration channels such as computer terminals, online trading platforms, telephone entrustment, etc. provided by securities companies. The required account is a stock account. Investors with existing stock accounts do not need to open new accounts.

8. What are the restrictions on the declaration of warrants?

Answer: The number of single order of warrant trading shall not exceed 1 million, and the minimum change unit of the order price is 0.001 yuan.

The number of warrants to be purchased is an integral multiple of 100, that is, the minimum number of warrants to be purchased each time should be 100, or an integral multiple of 100. For example, 100 or 1200 shares can be purchased, but 99 or 160 shares cannot be purchased.

There is no limit on the number of warrants to be sold. For less than 100 warrants held by investors, such as 99 warrants, they can also be reported for sale.

9. When can warrants be traded?

Answer: The trading time of warrants is the same as that of stocks, that is, the call auction time (9:15~9:25) and the continuous auction time (9:30~11:30, 13:00~15:00) on each trading day.

10. Does the warrant have a duration? What's so special about this?

Answer: The warrant has a certain term, and the transaction will be terminated upon expiration. Therefore, investors should pay attention to and understand the duration of the warrants in a timely manner through various means, such as the warrant issuance prospectus, the listing announcement, and the suggestive announcement issued by the warrant issuer, so as to avoid the loss caused by the failure to sell the warrants or exercise the warrants when they are due.

11. Are warrants subject to T+0 trading?

Answer: Yes, it is different from the fact that stocks cannot be sold on the day they are bought. Warrants are subject to T+0 trading, that is, warrants bought on the day can be sold on the day they are bought.

12. Are warrants subject to price limits? How is the price limit regulated?

Answer: Warrant trading is subject to price limit, but it is different from the 10% proportion limit of stock price limit. The rise and fall of warrant is limited by the price of rise and fall rather than the percentage, which is calculated according to the following formula:

The rising price of the warrant=the closing price of the warrant on the previous day+(the rising price of the underlying securities on the current day - the closing price of the underlying securities on the previous day) × 125% × the exercise ratio;

The decline price of the warrant=the closing price of the warrant on the previous day - (the closing price of the underlying securities on the previous day - the decline price of the underlying securities on the current day) × 125% × the exercise ratio.

When the calculation result is less than or equal to zero, the decline price of the warrant is zero.

For example, the closing price of warrants on a certain day is 2 yuan, and the closing price of underlying stocks is 10 yuan. The next day, the underlying stock rose to a ceiling of 11 yuan. If the warrant also rose to a ceiling, according to the above formula, the ceiling price of the warrant is 2+(11-10) × 125%=3.25 yuan. At this time, the percentage increase of the warrant is (3.25-2)/2 × 100%=62.5%.

13. Under what circumstances are warrants suspended?

Answer: As a derivative product of securities, the value of warrants mainly depends on the value of underlying securities, so there is a close linkage between the price of warrants and the price of underlying securities. According to the provisions of the Exchange: where the trading of the underlying securities is suspended, the trading of warrants shall be suspended accordingly; Where the underlying securities are resumed, the warrants shall be resumed. In addition, the Exchange also stipulates that the Exchange has the right to suspend the trading of warrants separately according to market needs.

14. What information will be disclosed in warrant trading?

Answer: The warrant information available to investors mainly includes: (1) issuing real-time warrant trading information with the market; (2) The list of holders whose number of each warrant is negotiable and whose number of warrants reaches or exceeds 5% of the negotiable number announced by the Exchange before the opening of the market every day; (3) Various announcements issued by the warrant issuer in accordance with the relevant provisions to perform the obligation of information disclosure.

Exercise

15. How to exercise warrants?

Answer: Warrant holders who exercise their rights shall entrust members of the Exchange to report through the trading system of the Exchange. The number of warrants declared for exercise is an integral multiple of 100. The exercise declaration order is valid on the same day and can be revoked on the same day.

16. How to calculate the settlement price of warrant exercise?

Answer: The settlement price of the underlying securities is the average closing price of the underlying securities ten trading days before the exercise date.

17. What are the special provisions of the Exchange on the exercise of warrants and the transaction of underlying securities acquired after the exercise?

Answer: The Exchange stipulates that warrants purchased on the same day can be exercised on the same day. The underlying securities obtained during the exercise on that day may be sold on the next trading day.

18. What if the warrant is in the price but I forget to exercise?

Answer: For the warrants exercised by cash settlement, and the warrants are in the money at the expiration of the exercise period, the warrant issuer will provide automatic exercise arrangements, that is, the entrusted trading and settlement system will actively pay the cash spread to the warrant holders who have not exercised the warrants within three working days after the expiration of the warrants. Warrantholders who forget to exercise will automatically receive the cash spread.

For warrants exercised by means of securities payment settlement, and the warrants are in the money at the expiration of the exercise period, the trading and settlement system cannot exercise automatically because warrant holders need to pay the exercise price or deliver securities as agreed. However, the member of the Exchange who handles the exercise of warrants on behalf of others shall remind the warrant holders who have not exercised the warrants to exercise in time five trading days before the expiration of the warrants, or exercise on behalf of others as agreed in advance.

19. What are the fees for investors to trade warrants and exercise?

Answer: The trading commission and fees of warrants shall be subject to the standards of funds listed and traded on the Exchange. Specifically, the commission for warrant transaction shall not exceed 0.3% of the transaction amount, and 0.05% of the share transfer fee shall be paid to the registration company at the time of exercise according to the par value of the share transfer, and no exercise commission shall be charged. (Tentative)

Warrant Dictionary:

　 ü Warrants: It is a kind of right certificate, which stipulates that the holder has the right (rather than the obligation) to purchase or sell the underlying securities from the issuer at the agreed price within a certain period of time, or collect the settlement difference by means of cash settlement.

　　 ü Underlying securities: Refers to the securities that the warrant issuer promises to purchase or sell to the warrant holder according to the agreed conditions.

　　 ü Exercise: Means that the warrant holder requires the issuer to perform its obligations under the warrant at the agreed time, price and manner.

　　 ü Exercise price: It refers to the price agreed by the issuer when issuing warrants that the warrant holder purchases or sells the underlying securities to the issuer.

　　 ü Exercise ratio: Refers to the number of underlying securities that can be purchased or sold by a warrant. For example, if the exercise ratio of a warrant is 0.1, 10 warrants can buy 1 share.

　 ü In price warrants: Refers to the call warrant whose exercise price is lower than the settlement price of the underlying securities when the warrant holder exercises; Or put warrants where the settlement price of the underlying securities is lower than the exercise price of the warrants. When there are in the price warrants, the exercise can make a profit.