Warrants

What is a Warrant ?

A warrant is an instrument issued by a credit establishment. In exchange for the payment of a premium when bought, this instrument entitles the holder to buy (in the case of a call) or sell (in the case of a put) an underlying component (share, index, bond, currency). The due date for a warrant is normally longer than for an option

This price will vary depending on the value of the underlying volatility of this value, the remaining time, the exercise price and the subsequent performance of the underlying asset. This premium is still lower than the price of the underlying asset itself.

One of the most important differences between warrants and shares is that warrants can only be exercised during a specific period of time and lose their value after their expiration date. Shares do not have an expiration date. The expiration dates are often far in the future, sometimes more than 5 years.

The advantages of investing in warrants

• with the premium, the initial investment is limited
• leverage effect
• a warrant can be used to protect a portfolio against bear markets
• buying and selling warrants is very simple
• a warrant is a right and there is no obligation to exercise this right
• it is possible to take positions in different categories that are difficult to access for an individual investor
• the risk is limited to the invested amount

Trade warrants via Keytrade Bank Luxembourg

You can trade warrants at the same advantageousfee as shares:€ 14.95 per transaction for orders on Euronext.

You wish to trade warrants with Keytrade Bank Luxembourg? Click here to subscribe now and in a couple of days you will benefit from our trading platform for all your stock market investment.