Primary dealer of warrants GF Securities Liu Siling
Unlike stocks, warrants have expiration dates and are not long-term valid. When the warrant expires, if it is not in the money, it has no value at all. For put warrants, during the exercise period, if the exercise price is higher than the stock price, the warrants will have exercise value; If the exercise price is lower than the stock price, the warrants will have no value at all. Whether the in price warrants are exercised or not should consider the exercise cost comprehensively, while the out of price warrants should not be exercised. The intrinsic value of the out of price warrants is zero, and the exercise will only suffer greater losses.
with Airport JTP1 Take for example. Airport JTP1 is the only American style warrant in the two cities at present. The exercise period is from March 23, 2006 to December 22, 2006. The exercise means that the holder will Baiyun Airport Sold to controlling shareholders. From the data of the previous trading day, assuming that investors only hold warrants, if they choose to exercise, they will buy Baiyun Airport at 7.34 yuan, and then sell it to major shareholders at 6.9 yuan. Even if the warrants are delivered free of charge, they will lose at least 0.44 yuan (7.34-6.9). Originally, the biggest loss that investors have to bear when investing in warrants is only the capital invested at the beginning, but the exercise of out of price warrants will aggravate the loss. For example, in the 10 trading days from November 20 to December 1, the maximum price of airport JTP1 was 1.248 yuan and the minimum price was 0.881 yuan. Regardless of transaction costs, the corresponding losses were 1.688 yuan (1.248+0.44) and 1.321 yuan (0.881+0.44). Even if the warrant is purchased at a historical low price of 0.616 yuan, the exercise will lose 1.056 yuan (0.616+0.44).
If the investor has previously held Baiyun Airport shares If we intend to cash out the portfolio of stocks and warrants, the income from exercise is far less than that from direct selling in the market. When sold in the market, the regular shares can be sold for 7.34 yuan, the warrants can be sold for 0.912 yuan, and the total income is 2.542 yuan (7.34-5.71+0.912-0.616). However, as of December 4, 299 million airport JTP1 had been exercised for various reasons, causing unnecessary losses, which is really strange. The correct strategy should be to choose to sell directly in the market, whether only holding warrants, equity or both.
The time value of the warrant is lost over time. When the warrant expires, its time value will drop to zero. At present, the airport JTP1 has only 8 trading days left. In order to reduce losses, it is the best policy for investors to sell warrants. As the maturity date approaches, most of the out of price warrants have plummeted, and investors who have not entered the market should not blindly participate in short-term speculation of doomsday warrants.
