Ping An Securities Derivatives Department
Recently, the price of some deep out of price put warrants has seriously deviated from the value, attracting the attention of many investors. However, many investors still have misunderstandings about several key issues of put warrants. We clarify the following typical issues, hoping that investors can correctly understand the risks of warrants, make rational investment, and not blindly participate in the speculation of put warrants.
1. Investors need to sign and carefully read the Warrant Risk Disclosure Statement, and bear the market risk.
Warrants have duration and are a kind of leverage investment tool with high risk, which is different from traditional stocks in nature. Because of this, investors need to sign the Warrant Risk Disclosure Statement before trading warrants, and investors should have a certain understanding of the risks of warrant investment before signing the Warrant Risk Disclosure Statement. It is inadvisable for some investors to sign the Warrant Risk Disclosure Statement without carefully reading it. Once an investor signs the Warrant Risk Disclosure Statement, it indicates that the investor has understood the relevant risks of warrant investment and has assumed corresponding responsibilities and risks for its own transactions and exercises.
2. Warrants created by securities firms can be either cancelled or exercised upon expiration.
After the creation of warrants, securities companies need to assume corresponding obligations. The securities firm can choose to buy back the warrants created by itself before the expiration of the warrants and cancel them, or can choose not to buy back the warrants and participate in the exercise at the end of the duration. For the put warrant, the investor's exercise means selling the positive shares at the exercise price, and the creator participating in the exercise must buy the corresponding positive shares at the exercise price. Before expiration, the founder will decide whether to buy back and cancel or participate in the exercise according to the degree of the price of the warrants, the market price and the use of its own funds. Since last year, the A-share market has increased significantly, so currently the put warrants on the market are generally out of price and have no exercise value. As soon as the CMB CMP1 For example, if CMB CMP1 continues to maintain an out of price state at the end of the period, the exercise of investors will bring greater losses.
3. The creation behavior is clear and well founded, taking into account the interests of investors.
By introducing rational institutional investors into the warrant market to regulate supply, the creation system can restrain excessive speculation in the warrant market and ensure the smooth operation of the warrant market. First of all, in the listing announcement of the Shanghai Stock Exchange's share reform warrants, it has been clearly stated that the securities companies can create such warrants, and the Exchange will also issue a notice before the listing of the warrants, announcing to the market the method on which the warrants were created and the specific listing date and other information. In other words, the creation and cancellation of securities companies is not sudden and unexpected to the market, but full information disclosure in advance following the principles of openness, fairness and justice.
Secondly, in order to fully protect the interests of the original circulating shareholders and the implementation of the consideration of the share reform, the Exchange stipulates that the warrants created by securities companies must be listed and circulated on the fourth trading day of the listing of warrants. As we all know, the creation of warrants will only affect its market price through supply, but will not affect its final exercise value. Therefore, if the warrant price is significantly overvalued at the initial stage of listing, investors can take profits as soon as possible to obtain consideration. If the warrant price fluctuates within a reasonable range, securities companies will not conduct large-scale creation. We take CMB CMP1 as an example to illustrate the market regulation function of the creation system. At the initial stage of CMB CMP1 listing, few securities companies participated in the creation because of the reasonable price, while at present, the price of CMB CMP1 is being hyped up, which has triggered a large number of securities companies to create.
Finally, the number of securities companies that can create is determined by their market prices and their own capital situation, which is the result of market-oriented group game. In the Interim Measures for the Administration of Warrants of the Exchange, there is no absolute limit on the number of warrants created, which is also conducive to playing the market-oriented regulatory function of the creation system.
4. How to exercise when the number of warrants exceeds the number of regular shares?
When the physical settlement put warrant is exercised, the warrant holder shall sell the regular shares held in hand to the issuer or creator according to the exercise price and exercise ratio. At present, the exercise period of warrants is generally five days. In fact, a share can be exercised for many times during this period. Therefore, when the number of warrants exceeds the number of outstanding shares of regular shares at the end of the period of validity of warrants, they can still be exercised. For example, suppose investors hold 100 shares China Merchants Bank For the shares and 200 CMB CMP1, only 100 CMB CMP1 shares need to be exercised first, and then 100 CMB shares need to be bought back from the market to be exercised again, so that all 200 CMB CMP1 shares can be exercised. Investors should be reminded that the exercise of warrants beyond the deep price will cause losses to investors.
To sum up, we clarified and explained several key issues of the put warrant, aiming to advocate rational investment of investors. It is worth mentioning that the behavior of securities companies can also provide reference for individual investors. For example, when a large number of securities companies participate in the creation of a certain warrant, it means that most securities companies believe that the price of the warrants is higher than the theoretical value at the current price level. This can not only provide the market with circulation, but also provide the market with relatively correct price expectations. Investors should also learn more about the unique characteristics of warrants and should not blindly participate in the speculation of some types of warrants.
