Ping An Securities Derivatives Department
As of the closing on October 22, 7 of the 11 warrants in the Shenzhen and Shanghai warrant markets had negative premium rates, of which Wuliang YGC1 The premium rate is - 17.2%, and the negative premium is the highest. In fact, the large-scale negative premium phenomenon of subscription warrants has lasted for a long time. So, why do these subscription certificates present a negative premium for a long time, and what does negative premium mean to investors? In this issue, we will make a brief analysis on these two issues.
The premium rate is a percentage, which indicates how many positive shares need to change in a favorable direction when investors hold warrants at maturity, so that investors can neither gain nor lose. If the premium rate of the warrant is negative, it means that the market price of the warrant is lower than its intrinsic value, and the value of the warrant is undervalued. The main reasons for the negative premium of warrants are as follows: First, warrant investors' judgment on the future market is contrary to the current trend of positive shares, resulting in the performance of warrants not matching with positive shares, lagging behind the reasonable increase. The trend of warrants can often be used as an expectation of the future trend of positive shares. The dull trading of warrants indicates that warrant investors are not optimistic about the future trend of positive shares; Second, because there is no short selling mechanism in the A-share market, the negative premium of subscription warrants cannot be eliminated through risk-free arbitrage. However, near the exercise date, the degree of negative premium may gradually shrink, and even by the exercise date, the negative premium has disappeared; Third, most of the warrants in the A-share market now have high absolute prices, deep prices, and low effective leverage, which are not attractive to warrant investors, leading to a low premium rate of warrants. At present, this situation will continue, so the negative premium of subscription warrants may exist for a long time.
Negative premium subscription warrants may have some arbitrage opportunities for some investors. We take MaSteel CWB1 as an example to make a simple analysis. The latest exercise price of Maanshan Steel CWB1 is 3.33 yuan, and the exercise ratio is 1. On October 22, the closing price of the warrant was 7.121 yuan, with a premium rate of - 7.8% Masteel The closing price of is 11.41 yuan. There are two exercise periods of Maanshan Steel CWB1, from November 15 to 28, 2007 and from November 17 to 28, 2008, during which investors can exercise. Assuming that investors are optimistic about the future market of Maanshan Iron and Steel Co., Ltd. and buy 10000 Maanshan Iron and Steel Co., Ltd. shares at yesterday's closing price, they plan to hold them until after November 15. Regardless of transaction costs, the cost for investors to hold Maanshan Iron and Steel Co., Ltd. shares is 114100 yuan. If the investor buys 10000 copies of Maanshan Iron and Steel CWB1, the cost will be 71210 yuan and they will be held to maturity. When the warrants are due for exercise, another 33300 yuan will be spent to obtain 10000 shares of Maanshan Iron and Steel Co., Ltd shares 。 In this case, the total cost for investors to hold Ma Steel shares is only 104510 yuan. The cost of acquiring stocks through warrant purchase is 7.8% lower than that of buying stocks directly. If the investors have made the deployment of exercise arbitrage in the first exercise period, if the decline of Maanshan Iron and Steel Co., Ltd. exceeds 7.8% before November 15, the investors may suffer losses if they choose to exercise. Therefore, the purchase of negative premium warrants is not necessarily stable, and investors are expected to invest cautiously.
