Ping An Securities Derivatives Department
Many investors know that warrant investment is much more risky than stock investment. The main reason is that the price of warrants tends to fluctuate greatly, and the range of rise and fall is much larger than that of corresponding stocks. For example, on August 18, Rizhao Port The decrease was only 4.70%, while Rizhao CWB1 The decline was 9.87%, much higher than that of the stock market. Therefore, an important risk faced by investors investing in warrants is the sharp fluctuations of warrant prices. Then why does the price of warrants fluctuate so much? How can investors guard against this risk?
The warrant price fluctuates greatly, on the one hand, it is determined by its own leverage characteristics. Warrants are a kind of leveraged investment tool that "spreads big with small". When the price of equity shares changes, the price of warrants tends to fluctuate much more than that of equity shares. In theory, investors can refer to the effective leverage ratio of warrants to judge the leverage effect of warrants. Assume that the effective leverage ratio of a warrant is 2, which means that if the price of the underlying stock changes by 1%, the price of the warrant should theoretically change by 2%, that is, the fluctuation range of the warrant price is twice that of the underlying stock.
On the other hand, in China's securities market, the daily limit of the rise and fall of warrants is also very different from that of stocks. The daily rise and fall limit of ordinary stocks is 10%, while the rise and fall limit of warrants is usually much larger than this proportion. According to the Interim Measures for the Administration of Warrants, the decline price of warrants=the closing price of the warrants on the previous day - (the closing price of the underlying securities on the previous day - the decline price of the underlying securities on the current day) × 125% × the exercise ratio. According to this formula, the decline of warrants=10% × 125% × exercise ratio × (closing price of underlying securities on the previous day/closing price of warrants on the previous day). If the calculation result is less than or equal to 0, the decline price is zero. Generally speaking, the exercise ratio is 1, and the price of positive shares is much higher than the price of warrants. Therefore, the daily decline limit of warrants will generally exceed 10%. For example, on August 18, the limit price of Rizhao CWB1 calculated according to the above formula was 2.450, which means that the maximum decline on that day can reach 37.37%!
Therefore, before investing in warrants, investors must fully understand the risk of sharp fluctuations in the price of warrants, so as not to affect their mentality due to excessive fluctuations in the price of warrants in the actual investment process. In order to reduce the losses caused by the sharp fluctuations of warrants, investors should first control their positions, and generally do not invest heavily in warrants unless they are extremely confident. In addition, investors should set a stop loss position before buying and selling warrants. Once the price falls to the stop loss price, they should stop loss and leave the market to limit the loss to an acceptable range. (The article is only for reference, and the profit and loss caused by investment based on it is irrelevant)
