Ping An Securities Derivatives Department
For investors in the warrant market, premium rate is a very important indicator. The premium rate refers to the percentage of increase (for subscription certificates) or decrease (for put certificates) of the underlying stock when the warrants are purchased at the current price, so that investors can reach the break even point.
Careful investors will find that the premium rate of many warrants in China's market is high for a long time. So, can such warrants be invested?
The first thing to note is that investment warrants should first judge the direction of positive shares, and then look at the premium rate index of warrants on this basis. In fact, if the investor's purpose is to hold warrants and intend to exercise at maturity, the premium rate is of great significance, because it directly determines whether he can make a profit from this investment; If investors focus on short-term operations, the importance of premium rate will be slightly reduced, but even so, it still has some reference significance. When the premium rate of a warrant is high, it can be considered that its trend is easier to separate from the positive stock, thus increasing the investment risk.
For example, on April 15, CITIC Guoan It rose 7.01%, while Guoan GAC1 rose only 2.97%; Shenzhen High tech CWB1 in Zhenggu Shenzhen Expressway When it rose 2.11%, it fell 1.36%. From the perspective of premium rate, Shenzhen Gaoxin CWB1 is as high as 160.29%, while Guoan GAC1 is also 82.29%. That is to say, if investors buy warrants at the current price, when the warrants expire, Shenzhen Gaoxin and CITIC Guoan need to rise 160.29% and 82.29%, so that investors can neither gain nor lose. This shows the risk of high premium warrants.
In addition, the maturity risk of high premium bonds should not be underestimated. For warrants approaching maturity, if the premium rate is still at a high level at this time, investors need to be particularly careful. The reason is that the shorter the residual period, the less likely the positive share price will change significantly during the duration of the warrant, and the price of the warrant will return to its intrinsic value when it nears the expiration, and the premium rate of the in price warrant will also return to near zero. Therefore, a high premium rate means that investors need to bear high costs and high risks, especially for some varieties with zero intrinsic value, such as some put warrants in China's warrant market, which still maintain a high premium rate when approaching the maturity. Although they may be driven by capital in the short term, they almost all exit at zero when they mature, Some investors lost their money. China Southern JTP1 will expire in late June. At present, its premium rate is still as high as about 40%, reminding investors to pay attention to risks and never participate in the speculation of put warrants.
So, is it absolutely impossible to buy high premium certificates? Not necessarily. When measuring the level of premium rate, we should also consider the residual maturity of warrants and the degree of both inside and outside the price.
The longer the residual maturity of the warrant, the more opportunities for the positive shares to change in the direction favorable to the warrant holders. Therefore, for warrants with long residual maturity, a higher premium rate can be allowed. For example, the premium rate of some varieties on the Chinese market is generally high at the initial stage of listing. One of the reasons is that these varieties are far away from the expiration time and have a large time value. To some extent, the premium rate reflects the time value of warrants. In addition, the degree of inside and outside the price of warrants also has a certain impact on the level of premium rate. Compared with the in the price securities, the premium rate of out of the price securities tends to be higher.
