Ping An Securities Derivatives Department
In the previous article, we mentioned that the factors affecting the price of warrants include the price of regular shares, the extension amplitude, the risk-free interest rate, the residual maturity and the exercise price. In fact, the exercise ratio of warrants is also an important factor affecting the price of warrants. However, unlike the aforementioned factors, the impact of the exercise ratio on the warrant price is relatively simple and easy to understand. The so-called exercise ratio is the number of positive shares that can be purchased or sold by holding a warrant. Taking Sinopec CWB1 as an example, its exercise ratio is 1:0.5, which means holding one share of Sinopec CWB1, that is, it has the right to buy 0.5 shares of positive shares at the exercise price during the exercise period SINOPEC (China Petrochemical Corporation Rights.
Obviously, the larger the value of the exercise ratio, the more shares that can be purchased or sold by the same warrant, and the greater the value of the corresponding warrant. Therefore, when investing in warrants, investors need to pay attention to the value of their exercise ratio, otherwise it is easy to misjudge the value of warrants. Moreover, when using some commonly used indicators, it is also necessary to consider the exercise ratio in order to properly measure the risk of related warrants.
For example, according to the Interim Measures for the Administration of Warrants of the Exchange, the rising price of warrants=the closing price of warrants on the previous day+(the rising price of underlying securities on the current day - the closing price of underlying securities on the previous day) × 125% × the exercise ratio; The decline price of the warrant=the closing price of the warrant 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. It can be seen that the larger the value of the exercise proportion, the more helpful it is to increase the price of warrants and reduce the price of warrants.
For another example, when calculating the premium rate of warrants, the exercise ratio must also be taken into account. Premium rate of subscription certificate=[(exercise price+subscription certificate price/exercise ratio)/stock price - 1] × 100%; The premium rate of the put warrant=[1 - (exercise price - put warrant price/exercise ratio)/stock price] × 100%. take Rizhao CWB1 For example, the closing price on Monday was 3.591 yuan, the closing price of regular shares was 4.66 yuan, and the exercise price was 7.08 yuan. If the exercise ratio is calculated as 1 by default, the premium rate is as high as 128.99%. However, in fact, Rizhao CWB1's exercise ratio is 2, so its real premium rate is 90.46%.
As low price warrants are more attractive, in general, the exercise proportion of warrants is less than 1, which is particularly evident in the covered warrant market in Hong Kong. However, under some special circumstances, such as the ex right of the regular shares, the exercise proportion of the warrants will change. According to the Interim Measures for the Administration of Warrants issued by the Exchange, the exercise proportion of the warrants shall be adjusted in accordance with the corresponding proportion when the positive shares are ex listed, and the adjustment formula is: the new exercise proportion=the original exercise proportion × (the closing price of the positive shares on the trading day before the ex listed/the reference price of the positive shares on the ex listed day). For example, Steel Vanadium GFC1 and Rizhao CWB1 both had an initial exercise ratio of 1:1, and the exercise ratio was increased to 1:1.209 and 1:2 in the middle of the process due to the effect of equity dividend.
