Primary dealer of warrants GF Securities Liu Siling
The price of warrants is lower than that of regular shares, which has leverage effect and magnifies investment income. However, if investors deliberately choose warrants with low prices, they will tend to choose short-term and out of price warrants for investment, which may cause unnecessary losses by ignoring the potential risks of warrants.
Recent data shows that some short-term out of price warrants have a high turnover rate and active trading, such as Wanhua HXP1 and Baotou Steel JTP1. Some investors prefer to buy and sell such warrants, which may be precisely because of the low price and high leverage ratio of such warrants. They expect the warrants to rise sharply when they expire, or become in the price to obtain high returns. But in fact, the risk is high. In other words, the value of the blog is not high.
Why is the risk of short-term out of price warrants quite high? The reason is that most of the time the return of short-term but out of price warrants is not commensurate with the risk.
First, the time value of short-term out of price warrants is rapidly depleted. Investment warrant and investment shares The big difference is that the warrants have a time limit. From the listing date to the maturity date, the time value of the warrants will gradually wear down, and the range will become larger and larger. Although the price of warrants is affected by the rise and fall of the stock price, the time value loss will not change, and the time value loss of the out of price end day warrants is the most serious. In the last month before expiration, the time value loss can easily erode 5-10% of the warrant price every day, as was the case with the previously delisted Shanghai Market JTP1.
Second, the sensitivity to positive stock fluctuations is not high. Since there is little chance for extreme out of price warrants to become in price on the maturity date, the price of such warrants is not so sensitive to changes in the price of the underlying stock (here, investors should pay attention to the difference between nominal leverage and effective leverage, and should use actual leverage as a reference for return/risk rather than leverage ratio). Therefore, warrants that are close to the maturity date and extremely out of price may not closely follow the price changes of the underlying shares.
Although short-term out of price warrants have low prices and high nominal leverage ratios, they contain high risks. When choosing warrants, investors should not rely on only one indicator, but also take into account premium, actual leverage, extended volatility and other indicators. After considering the expiration time limit of warrants, it is generally better to take short-term access.
