Getting to Know Structured Warrants
Understand the basics of Structured Warrants before you start trading.
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What Is a Structured Warrant?
A Structured Warrant is a derivative product issued by a securities company that gives investors the right to buy or sell a particular stock (the underlying stock) at a price and time determined in advance.
How Structured Warrants Work
See how the right to buy and the right to sell are exercised.
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Start Trading Structured Warrants
Practical steps to start trading Structured Warrants through M-STOCK.
Click HereStructured Warrant Advantages
Lower Initial Capital
Structured Warrants are generally priced lower than their underlying stock, making them an alternative for investors with limited capital.
Leverage Effect
Structured Warrants carry a leverage effect, so a movement in the underlying stock price can deliver greater profit potential for investors.
Structured Warrant Risks
Market Risk
Structured Warrant prices follow the price and volatility of the underlying stock. If the underlying stock does not move as expected, the value of the Structured Warrant can fall.
Time Value Decay
As the maturity date approaches, the time value of a Structured Warrant declines and may become worthless if it is not exercised.
Types of Structured Warrant
CALL Structured Warrant
The right to BUY the underlying stock at a predetermined price The Structured Warrant price RISES when the underlying stock RISES For investors with a bullish view of the market Used to optimise trading gains
PUT Structured Warrant
The right to SELL the underlying stock at a predetermined price The Structured Warrant price RISES when the underlying stock FALLS For investors with a bearish view of the market Used to hedge an investment
Structured Warrant Price Drivers
Understand these core indicators before making a trading decision.
Structured Warrant prices follow the price movement of the underlying stock. When the underlying stock rises, CALL warrants tend to rise while PUT warrants tend to fall. When the underlying stock falls, CALL warrants tend to fall while PUT warrants tend to rise.
Underlying Stock Price
The strike price determines the chance of the warrant being in the money. For CALL: the higher the strike price relative to the underlying stock price, the smaller the chance of being in the money. For PUT: the higher the strike price relative to the underlying stock price, the greater the chance of being in the money.
Strike Price
Volatility is a key component of Structured Warrant pricing. The higher a stock volatility, the higher the warrant price tends to be, because the chance of a significant price move increases.
Underlying Stock Volatility
The longer the tenor of a Structured Warrant, the higher its price tends to be, because there is more time for the underlying stock to move as expected.
Structured Warrant Tenor
Expected dividend payments affect Structured Warrant prices because they influence the projected underlying stock price after the ex-dividend date.
Underlying Stock Dividend Yield
Interest rates affect Structured Warrant prices through the funding cost component. A change in the benchmark rate affects the theoretical fair value of the warrant.
Interest Rate
Structured Warrant Trading Strategy
Analyse the Underlying Stock
Analyse the underlying stock thoroughly, including price trend, technical levels, and the relevant fundamental factors.
Choose the Warrant That Matches Your Analysis
Match the warrant to your analysis: CALL when you expect the stock to rise PUT when you expect the stock to fall
Check the Structured Warrant Matrix
Use the Structured Warrant Matrix as a reference to understand the product parameters and to help determine a reasonable buy and sell range.
Trade Through M-STOCK
Structured Warrants can be traded through M-STOCK for a more practical trading process.
Structured Warrant IPO
Frequently Asked Questions
A Structured Warrant is a derivative product issued by a securities company and is generally used for short-term trading. An ordinary warrant is issued by a listed company, often given as a bonus in an IPO or rights issue to attract investors, so the two have different purposes and leverage.
No. Structured Warrants are not suitable for every investor because the risk is relatively high. The product is better suited to investors with an aggressive risk profile who understand derivative products and have adequate trading experience.
At maturity:
If it is in-the-money (ITM), the investor receives a cash settlement from the issuer.
- CALL: ITM when the underlying stock price is above the strike price
- PUT: ITM when the underlying stock price is below the strike price
If it is out-of-the-money (OTM), the Structured Warrant expires worthless.
- CALL: OTM when the underlying stock price is below the strike price
- PUT: OTM when the underlying stock price is above the strike price
No. Owning the underlying stock is not a requirement to join a Structured Warrant IPO. Orders can be placed through HOTS Mobile or HOTS.
The minimum order for a Structured Warrant IPO is Rp1,000,000 per product. Funds must be available no later than the last day of the public offering period.
