Basic knowledge of investment opportunity warrants that cannot be missed

Basic Knowledge of Warrants

　　 1. What is a warrant?

Answer: Warrant is a kind of securities. After paying the premium, investors have the right (rather than the obligation) to purchase or sell the underlying securities from the issuer at the agreed price within a specific period (or specific time point).

Wherein: Issuer refers to listed companies or securities companies and other institutions; Royalty refers to the price paid when purchasing warrants; The underlying securities may be individual shares, funds, bonds, a basket of shares or other securities, and are securities that the issuer promises to purchase or sell to warrant holders under agreed conditions.

　　 2. How can investors use warrants to obtain excess profits and avoid risks?

Answer: (1) Use warrants to obtain excess profits. Warrant is a kind of investment tool that can be big with small amount. It only costs a small amount of premium when purchasing, but it may yield a large amount. For example, the investor Mr. Li invested 1000 shares in Company A

It can be seen from the above table that warrant investment is highly leveraged. If Mr. Wang's judgment is correct, the return on his purchase of Company A's warrants far exceeds that of Mr. Li's purchase of shares. Of course, if Mr. Wang's judgment is wrong, his investment loss is also far greater than Mr. Li's.

(2) Use warrants for hedging. If an investor already holds the shares of Company A, he can purchase warrants for hedging. If an investor estimates that the shares of Company A will rise, but is worried that it may not conform to expectations, he can spend a small amount of premium to buy the put warrants of Company A. Once the shares do not fall, the gains from the warrants can be used to compensate for the losses of Company A. If the prediction is correct, the stock price will rise, and the stock purchased will have made a profit, but only a small amount of premium will be lost.

　　 3. What risks should investors pay attention to when investing in warrants?

(1) Risk of violent price fluctuation: warrant is a highly leveraged investment tool

(2) Price miscalculation risk: The warrant price is affected by many factors, such as the price trend of the underlying securities, exercise price, maturity time, interest rate, equity distribution, supply and demand in the warrant market, and the warrant holder's misjudgment of these factors may also lead to investment losses.

(3) Timeliness risk: The warrant has a certain duration, and its time value will decline rapidly as the maturity date approaches.

(4) Performance risk: if the issuer has financial risk, investors may face the risk that the issuer cannot perform.

　　 4. What procedures should investors go through before entering the market?

An investor shall use the A-share securities account to declare the subscription, trading and exercise of warrants. Investors must sign a risk disclosure letter with the securities company before they can participate in the warrant trading.

　 5. What's the difference between the trading rules of warrants and A-shares?

Note 1: The rise and fall of warrants are limited by the absolute price of the rise and fall, and the calculation formula is as follows:

The rise (fall) price of the warrant=the closing price of the warrant on the previous day ± (the rise price of the underlying securities on the current day - the closing price of the underlying securities on the previous day) × 125% × the exercise ratio. For example, the closing price of company A's warrant on a certain day is 4 yuan, and the closing price of company A's stock is 16 yuan. The shares of Company A can rise or fall by up to 10%, or 1.6 yuan, the next day; The warrant can rise or fall by (17.6-16) × 125%=2 yuan the next day, which can be converted into a rise/fall ratio of up to 50%.