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How do index warrants work?
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lytefunk
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12-May-2007 05:31
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Ah.... okok that would make some sense.. I actually used another site, http://www.warrants.com.sg which said that the premium is negative and its ITM. Yeah... market maker very chao one.. Ugh.. gotta read more about warrants first. Thanks for the info! |
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vonatar
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11-May-2007 21:48
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hmm. each warrant comes with a bunch of documents which explains the settlement details, amongst other things. you can find the settlement document for your warrant here. Just search for it, and click it to open up the details. http://sg.warrants.com/singapore/en/home.cgi... anyway, like what leeh1888 said, its in HKD so you gotta apply a currency conversion, and also there is a certain % exercise price to pay as well, if you choose to convert them. The price of warrents ain't really dictated so much by supply-and-demand, or market expectations. Not that I've noticed anyway. Most warrants are "controlled" by a market-operator which provides the buy/sell bids at regular intervals to provide liquidity, depending on several factors, such as the time-value of the warrants, the underlying value, interest rates, expectations... etc... I held some STI warrants to expiry before... lol.. it was a mistake. I wouldn't really recommend it unless you are certain that the underlying price would shoot up during the last few days. |
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leehl888
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11-May-2007 17:59
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the strike should be in HKD, you may want to check. Tks |
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lytefunk
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11-May-2007 17:41
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Hey guys, been really new to warrants, but I understand how they work with an underlying share. How does it work for index warrants? For example, this particular one I'm following, strike is 20200, conversion ratio is 250. So lets say HSI is at 20500, the warrant should be (20500-20200)/250 = S$1.20? How come its at $0.415 now? Does that mean most people expect the HSI to drop? Lets say that you hold the warrant to expiry, which is 30 May 07, and the HSI closes at 20600. Then the market maker will send you a cheque for (20600-20200)/250 = $1.60 ? (per share that is) I must have missed out some details somewhere, cause it seems to be deep in the money now.. Anything that I missed out? |
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