Warrants can be an attractive way to trade with a limited amount of invested capital. You invest in the change of value for a share, an index or other assets without buying the actual underlying asset. This is possible due to the leverage inherent in warrants, where percentage movements in the price of the underlying are amplified. Exchange traded warrants are as easy to trade as shares. Warrants have been traded on Nasdaq Nordic since 1995 and market making in warrants ensure that their liquidity is very high.
What Characterizes a Warrant?
A warrant is a security that gives the holder the right to buy or sell an underlying asset, at a specified price, also called the strike price. For many investors, warrants may seem similar to options. However, warrants typically have longer maturities than options, and are issued over a wider range of assets. Warrants are issued by financial institutions which will determine the terms for the specific warrant.
What Does Nasdaq Nordic Offer?
At Nasdaq Nordic, there are many warrants with a variety of underlying assets to choose from. Warrants can be divided into different types to make it easier to find and compare.
- Plain vanilla warrants are simple buy or sell warrants with shares, indices or currencies as underlying.
- Knock outs (including turbo warrants and mini-futures) are warrants that terminate and cease to exist, if the relevant price of the underlying asset touches a predetermined barrier. For turbo warrants, the value of the knock out warrant on the expiry date is the difference in price of the underlying and the strike price in the warrant. Mini-futures differ from turbo warrants in that they are open-ended.
- Exotics are warrants with a more complex structure.
How Does the Trading in Warrants Work?
You can trade warrants via your bank, broker or Internet broker. Banks often offer trading via their Internet portal. You can trade warrants on Nasdaq Nordic when they are issued or in the secondary market. Perhaps you don’t want to keep your warrants until they expire, but want to sell them before the expiration date. The market maker will ensure the possibility to do so by continuously quoting prices in the warrant.
September 2, 2014
“Open House Helsinki - Warrant seminar"
NASDAQ OMX held an Open House event on September 2, 2014. As part of the event, Danske Bank held a presentation on Warrants.
View the presentation from the event below: