Ping An Securities Derivatives Department

Since yesterday, Rizhao CWB1 Stop trading and enter the exercise period. Investors who still hold Rizhao CWB1 may have questions about whether they should exercise their rights on Rizhao CWB1?

First, we need to start with the concept of "exercise". "Exercise" is essentially a right granted to investors by warrants. Investors can choose to exercise this right, and they can also choose to give up. The exercise of warrants is equivalent to the purchase of positive shares with the exercise price as the cost (regardless of the cost of call warrants) and the exercise ratio; On the contrary, the put warrant is just the opposite. The exercise of the investor is equivalent to the purchase of the positive shares with the exercise ratio and the redemption of the warrant issuer at the exercise price.

Take Rizhao CWB1 for example, its exercise ratio is 1:2, and the exercise price is 7.08 yuan. Therefore, the exercise of one Rizhao CWB1 is equivalent to buying two at a price of 7.08 yuan Rizhao Port Shares. That is to say, if the cost of call warrants is not taken into account, the required supplementary capital is 7.08 × 2=14.16 yuan (other costs are not taken into account), and two Rizhao Port shares can be obtained.

It can be seen that whether investors should exercise has nothing to do with the exercise ratio of warrants, but depends on the higher of the price of equity shares and the exercise price of warrants. For the warrant, if the positive share price is higher than the exercise price of the warrant, the exercise can be profitable without considering the purchase cost of the warrant. Take MaSteel CWB1 as an example, its exercise price is 3.26 yuan, and the exercise ratio is 1:1. As of yesterday's closing, the price of the regular shares was 3.89 yuan. Based on this price, investors can earn 3.89-3.26=0.63 yuan from exercising each piece of Maanshan Steel CWB1, regardless of the cost of buying warrants. If the positive share price is lower than the exercise price of the warrant, the exercise will lose money. For example, the closing price of the positive shares of Rizhao CWB1 yesterday was 5.27 yuan. If the investors choose to exercise, they need to pay 7.08 × 2=14.16 yuan for each warrant, and obtain two shares with a price of 5.27 yuan, which is equivalent to expanding the loss (7.08-5.27) × 2=3.62 yuan in addition to the total loss of the funds purchased from Rizhao CWB1. It can be seen that at the current price of Rizhao Port, investors should not choose to exercise.

However, since the exercise period of Rizhao CWB1 is from November 19 to December 2, and there are still 9 trading days before the expiration, it is not impossible to be included in the price in theory. However, it should be noted that Rizhao CWB1 is deeply out of price. Rizhao Port will rise at least (7.08-5.27)/5.27=34.35% during this period, so Rizhao CWB1 has the exercise value. Investors who still hold Rizhao CWB1 need to pay attention to the trend of positive shares at any time to make the right choice.