Derivatives PK: options and warrants two brothers
In the family in financial derivatives, options and futures are a "good brothers", but today we want to say is another good option brothers --- warrants, the reason that Talia brothers, because they have a lot of similarities, both on behalf of the rights of the contractual documents that the buyer (right side) is entitled to the agreed price at the agreed time to buy or sell an agreed amount of the underlying securities, options and warrants so where does the difference?
First, the meaning of
Options, refers to a contract, from the eighteenth-century American and European markets later, the contract entitling the holders to purchase or sell an asset at any time before a certain date or that date at a fixed price right.
Warrants in the United States in 1911 originated abroad lamps and energy companies. In 1929, as a species warrants and become a tool of speculative market manipulation. 1960s, many American companies use stock warrants as a means of financing mergers and acquisitions, due to the relatively inexpensive warrants, warrants and even as part of a promotional tool.
Second, the product type
According to different types of underlying assets, options can be divided into financial options and commodity options. Financial options, including stock options, the type of ETF options, stock index options, interest rate options and options and so on.
Standard Classification of warrants (1) divided by trading in the direction of call warrants and put warrants. (2) the exercise of warrants as claimed period divided into European and American warrants (3) by the issuer can be divided into equity warrants and covered warrants.
Third, issuers
No stock options ETF issuer by the Exchange in terms of the contract design, market participants pay sufficient margin under the premise of open positions can be put option.
Warrants (Share Warrant), refers to a third person other than the issuer or its underlying securities issuance, the holder of the agreement within a specified period or a specific maturity date, or the right to buy the underlying securities at the agreed price to the issuer, or cash settlement charge a price difference of securities settlement.
Fourth, determine the exercise price of
On the options market, to determine the exercise price is determined by the Exchange in accordance with certain rules.
The exercise price of the warrants is determined by the issuer in accordance with certain models.
Fifth, the characteristics of contract
Option is an exchange-traded standardized contracts, before the subject of the transaction, the contract unit, the strike price, expiration date, etc. are fixed.
The warrants are non-standardized contracts, contract elements is determined by the issuer.
Six transactions
Options trading more flexible than warrants trading. Options can buy subscription can also sell or buy put options it may also sell put option that allows long, short.
However, the warrants will not do, ordinary investors can only buy warrants, the warrants can not be sold.
There are many confusing concepts in financial investments, that's KlipC bring options and warrants difference information for everyone. Investors with you next see why investors use options to hedge their own risks in the capital market. At the same time, why the option is one of the most effective hedging instruments.
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