The third of the four major risks of warrant investment: T+0 risk

Ping An Securities Derivatives Department Xue Pu

The so-called "T+0" refers to the trading system in which the securities and price clearing and delivery procedures are handled on the day when the securities are traded. In short, the securities bought on the day can be sold on the same day. Similarly, "T+1" refers to the securities purchased on the current day, which can only be sold on the next trading day.

Since January 1, 1995, in order to curb excessive speculation and maintain the stability of the capital market, China's stock trading system has changed from the original "T+0" to "T+1", and has continued to this day. However, the warrant products launched since 2005 have not followed this system. The SSE and SZSE respectively issued the Interim Measures for the Administration of Warrant Business of the SSE and the Interim Measures for the Administration of Warrant Business of the SZSE, which stipulated all aspects of the warrants applying for listing, and clearly proposed that the warrants should implement the "T+0" trading system.

While the implementation of the "T+0" trading system provides investors with the opportunity to conduct band operations, the risks associated with it should not be underestimated. For its own reason, the "T+0" risk comes from the high volatility of warrants. On the one hand, warrants have a leverage effect. Generally, when the positive shares rise (fall), the increase (decline) of call warrants is greater than that of positive shares, and the decrease (rise) of put warrants is greater than that of positive shares. Therefore, in theory, the volatility of warrants should be far greater than that of regular shares. On the other hand, the unique "T+0" trading system of warrants makes them popular with short-term funds. Many investors often operate warrants frequently within one day in order to realize short-term windfall profits, resulting in a high turnover rate of warrants. for example CIMC ZYP1 From May 30, 2007 to July 3, 2007, the daily turnover rate was 239.67% at the lowest and 753.31% at the highest! The high turnover rate further increases the volatility of warrants, and also makes it more difficult for investors to judge the capital movement and the actual situation of the trading market, thus further increasing the market risk.

Generally speaking, if the trend of the market and the positive stock is relatively stable on that day, it will be easier to grasp the band of the warrant price. However, because the range is not large, considering the transaction cost, the yield will not be very high. On the contrary, if the market and stocks fluctuate strongly, the fluctuation range of warrants will be multiplied. In the case of sharp decline and sharp rise, the top and bottom of the band will also become very difficult to grasp, and blind purchases are likely to be deeply embedded. There are also some investors who lack sufficient short-term trading skills and blindly chase up and down many times in a day, resulting in large losses.

Therefore, when trying to operate the "T+0" band, investors should first be prepared to take high risks, and then have a more accurate grasp of the trend of the market and the positive shares. In addition, they should try to control their positions and stop losses in time to avoid large losses.

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