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What is the impact of dividend yield on the price of warrants?
First of all, the holders of warrants (whether call warrants or put warrants) have no right to receive dividends paid by the underlying securities.
Secondly, the expected dividend paid by the underlying securities during the duration is deducted from the warrant price. For example, if a
If the stock with a price of 100 yuan will pay a dividend of 3 yuan within one year, the pricing process of 1-year warrants (call or put) with its underlying securities will assume that the actual price of the stock is 97 yuan. This means that the price decline of the stock after ex dividend should have no impact on the price of call or put warrants. However, if the company announces that it will increase or reduce the dividend yield, the price of warrants will change. Generally, the higher the expected dividend yield, the lower the price of the call warrant and the higher the price of the put warrant.
What is the impact of market interest rate on the price of warrants?
From the perspective of finance, buying a warrant is equivalent to buying (call warrants) or selling (put warrants) in the form of margin negotiable securities 。 Therefore, the rise of interest rate usually leads to the rise of the price of call warrants and the decline of the price of put warrants.
How does the price of warrants change during the duration?
Theoretically, the price of warrants includes two parts: time value and intrinsic value. The intrinsic value of the call warrant is equal to Max (the price of the underlying securities - the exercise price, 0), and the intrinsic value of the put warrant is equal to Max (the exercise price - the price of the underlying securities, 0). For example, based on a shares The exercise price of the warrant is 4 yuan, the exercise ratio is 1, the current price of the stock is 4.5 yuan, then the intrinsic value of the warrant is 0.5 yuan. If the stock falls to 3.9 yuan, the intrinsic value of the warrant is zero.
Even if the intrinsic value of a warrant is zero before its expiration, it still has some value. This part of the value is called the time value of the warrant, which represents the price paid by investors for the possibility of the warrant becoming an in price warrant at the expiration.
Over time, as the price of the underlying securities has less chance to change in a favorable direction, the warrants are less likely to have higher value at maturity. For this reason, the time value of warrants will erode as the maturity date approaches, and become zero on the maturity date. This phenomenon is called Time Decay. The time decay effect of the warrant value is not linear, but accelerates with the approaching of the warrant expiration date.
What is the trading procedure of warrants?
Warrants are listed and traded on the stock exchange, and the trading method is the same as that of stocks, which is conducted through stock brokers.
What are the transaction costs of trading warrants?
Just like buying and selling stocks, trading warrants need to pay brokerage commission, trading levy, trading fee and investor compensation levy. The transfer of warrants with cash settlement, regional or non equity securities as related assets is not subject to stamp duty. Stamp duty is required for trading warrants and final physical settlement. The rate of domestic warrant transaction is the same as that of fund transaction.
What role does the stock exchange play in the trading of warrants?
The stock exchange only provides a trading platform for warrants, and neither it nor its subsidiaries provide guarantee for the issuer of warrants nor guarantee for the issued warrants. Each warrant is a contract between the issuer and investors. Therefore, investors face the risk that the issuer (or its guarantor) will not perform its obligations under the warrants. In this way, investors must have their own judgment on the credit risk of warrant issuers.
The risks involved in issuing warrants are all managed by the issuer. The covered warrant allows the issuer to perform its obligations under the warrant by placing the underlying securities in the covered agreement. The information about the issuer's financial situation contained in the information disclosure documents can help investors evaluate the issuer's ability to perform its obligations.
(Ge Xinyuan, Guosen Securities Economic Research Institute)
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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