Mastering Warrants: A Guide to Choosing the Right Warrants?

Quick Answer: Choose a warrant in four steps: match call or put warrants to your bullish or bearish view and set a target price, pick an expiry that fits your timeframe, check the effective gearing to see how much the warrant moves relative to the underlying, and, other things being equal, prefer lower implied volatility.

Understanding the 4 Key Factors that may affect the Warrant Prices!

In the previous lesson, we delved into the world of Warrants & CBBCs (Introduction), exploring how to profit from trading them and the key differences between the Warrants and CBBCs.

Today, we will go on diving deeper into the world of Warrants & CBBCs, exploring their features and using them to enhance your trading strategies.

How to Pick the Right Warrants?

Learn how to pick the right warrant in Mplus Global!

When choosing a warrant, we suggest that investors consider the following 4 steps:

Step 1: View on Underlying Share/Index
Firstly, consider the market view on the underlying share/index and select call warrants for bullish views and put warrants for bearish views. Additionally, have a target price in mind to align the warrant selection with desired profit potential.

Step 2: Timeframe
Secondly, consider the timeframe and match it with the warrant’s expiry date to manage risk and leverage.

Step 3: Gearing Level
Thirdly, evaluate the effective gearing level to understand how the warrant price moves relative to the underlying asset’s price

Step 4: Implied Volatility
Finally, assess the implied volatility and prefer warrants with lower implied volatility, all other factors being equal.