Ping An Securities Derivatives Department
There are numerous failure cases in the derivatives market in history, the main reason is that there are problems in risk management. Warrants are a kind of derivative products. The risk of investing in warrants is far greater than that of investing in stocks. Therefore, the risk management of warrant investment is crucial for investors.
First, the investment risk of warrants mainly comes from the leverage effect of warrants. The warrant is a leverage investment tool that "spreads big with small". By investing in warrants, investors may obtain more profits with a small amount of cost, which, of course, also means that they may bear large losses. The greater the effective leverage of the warrant, the greater the range of rise and fall with the stock in theory, and the greater the risk faced by investors. Therefore, for some warrants with large effective leverage, once investors misjudge the direction of the positive shares, it is likely to cause large losses. Therefore, it becomes an important issue in the risk management of warrants to choose the most appropriate amount of effective leverage for their risk tolerance. If investors have relatively low risk tolerance, they should choose warrants with relatively small effective leverage.
Second, warrants and shares Different, warrants have certain duration and exercise risk. The vast majority of domestic warrants require investors to declare their own exercise during the exercise period. If investors do not exercise within the specified time, the warrants will become a piece of waste paper after expiration, which makes investors face the risk of exercise. In fact, there are rules to follow for the control of exercise risk. For in price warrants, please remember to exercise, while for out of price warrants, please do not exercise by mistake to avoid unnecessary losses. In addition, for negotiable securities For warrants settled by way of payment, some additional risks should also be noted. For example, in China, the stocks obtained from the exercise of warrants cannot be sold until the next trading day, which makes investors bear certain overnight risks.
Third, the time value of warrants will gradually decline with the approaching maturity of warrants, especially the performance of deep out of price securities. Therefore, in order to prevent the time value from being consumed too quickly, short-term warrant investment is more cost-effective, and we should try to avoid deep out of price securities.
Finally, investors also have to face the risk brought by the change of the extension amplitude. Because even if the positive share price does not change, as long as the extension amplitude decreases, the warrant price will also decline. Since warrant investment is mainly short-term, investors should also judge the trend of extension amplitude of warrants in the short term while grasping the price of the positive shares. If they buy warrants with excessive extension amplitude, even if the positive shares are correctly judged, there may still be less profits than the positive shares or even losses.
