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Whether shares Or warrants, investors often wonder why it is the best time to buy, and always hope to find the best time to enter the market. Undoubtedly, you can earn all the returns by finding the best time to enter the market, but when is the best time to buy?
In general, the best time for warrants to enter the market is when the positive shares are expected to rise (or fall) sharply in a short period of time, so warrants can play a small and broad role to the extreme. But when can we be sure that positive shares will rise sharply in the short term
(or plummet)? If the positive shares are expected to continue to rise (or fall) in the medium term, is it not appropriate to invest in warrants? It is necessary to have a clear judgment on the trend of positive shares
There are warrants with different maturities and exercise prices in the market to match investors' different expectations of the future market. If you think that the positive shares will change significantly in the short term, you can choose shorter term and extra price warrants; If you think that the regular shares will change only in the medium term, you can choose the warrants that are longer term, in price or even in price. In fact, unless investors believe that stocks will be trading sideways for a long period of time, any time is an opportunity to invest in warrants, as people say, all-weather investment tools are the truth. The key to success is that investors should choose a type of warrant that can best match the market situation.
To sum up, most of the time it is appropriate to buy warrants, but if investors do not have a clear judgment on the trend of positive shares, then it can be said that when is not suitable to do warrant investment. The amplification effect of warrants on capital
The characteristic of warrants is to provide leverage effect, which is like an amplifier. If an investor invests all his capital in warrants, his risk will be amplified by this amplifier, and his potential profits or losses will be amplified together. Therefore, if investors intend to add warrants to their portfolios, they should carefully calculate the proportion of capital invested in warrants?
To take a simple example, if the investor originally planned to invest 1000 yuan in a regular share A, assuming that there is a subscription certificate for regular share A in the market now, and its actual leverage is about 10 times, then if the investor wants to strive for the potential return equivalent to holding 1000 yuan of regular share A, he should put about 100 yuan on this subscription certificate instead of the original 1000 yuan.
If an investor invests the full amount of 1000 yuan in the warrants, he actually magnifies the risk by 10 times (the actual leverage refers to the change of the theoretical price of the warrants when the positive share price changes by 1%). Then suppose that the price change of share A is generally 5%, and the investors will risk 50% of the price fluctuation of the warrants if they invest all the funds in the warrants. This range is not affordable for ordinary investors.
In addition, investors can determine the amount of warrants they can invest in from the proportion of the overall portfolio. Generally speaking, the higher the actual leverage of warrants, the lower the amount of investment, and vice versa. However, if it is calculated based on the overall portfolio, investors should try not to use more than 10% of the overall portfolio to invest in warrants, because warrants are always investment instruments of a higher risk type. As a prudent investor, most of the assets of the portfolio should be placed on more conservative investment instruments, such as bonds, capital guaranteed funds and even time deposits. The rest can be placed in projects aimed at long-term capital growth, such as stock funds and even property. However, warrants, which are relatively risky tools, should only account for a small part of the overall portfolio to avoid raising the risk of the overall portfolio.
Author: Jin Xin negotiable securities Li Junfeng, Warrant Center
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
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