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Investor: The asset price fluctuates greatly. What impact does it have on the value of the warrants?
Li Jin: The price of the second right we mentioned before is higher than that of the first right, because it has more "time value". Investors hope to exercise this right one year later, or even one to two months later, when the market price of the property rises significantly, they will sell this right to those who are optimistic about the property price at a higher price. Therefore, the longer the term, the higher the value of rights.
Finally, the basic concept of the wheel is that the greater the volatility of asset prices, the higher the value of rights. It is assumed that there are two properties with the same price of HK $5 million. One of the properties is in the central area, and the price has been rising and falling; The other one is located in a remote rural area, and the price has never risen or fallen in the past 10 years. Assuming that investors have two more rights, they can purchase properties in the central area or remote rural areas for HK $6 million one year later. So, which is more valuable if these two rights are sold in the market?
Obviously, of course, the right connected to the property in the central area is more valuable. Because the price of property in remote rural areas has not risen or fallen in the past 10 years, it is expected that the property price will not deviate from the spot price of HK $5 million even if it waits another year. Even if someone buys this right, they will not be willing to pay too much, so the opportunity to exercise this right is small; On the contrary, as the price of the property in the central area rises and falls, the opportunity to exercise the right is greater, and the right will be more valuable.
By putting the above examples back on the wheel, we can see that the wheel investors have the right but not the responsibility. The most basic influencing factor of the wheel price is the price of related assets, followed by the time to maturity and the price volatility of related assets. (This article is written by France Xingye negotiable securities Provided by Li Jin, Senior Vice President of (Hong Kong) Limited
(Securities Times)
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