Why Do Companies Issue 窩輪?

October 9, 2021 by No Comments

 窩輪 is an English word that means Proof of Reading. It means when you have a 窩輪, you can buy or sell a stock, but it will take a fixed price and a fixed date. Let me give you an example to illustrate what a warrant is.

Suppose a bag of apples costs 100 yuan based on the current market price, but the seller offered you a voucher that costs 10 yuan. So, after discussing with some other sellers, you decided that after one year you will buy a bag of apples for 120 yuan. In that case, the buyer must understand whether the price of Apple may increase in the future. A year later, the price of a bag of apples was more than 130 yuan, and if you buy with 120 yuan, the buyer will have some profit. So, it should be kept in mind that if the price of apples were less than 130 yuan, you could not use the voucher, and the profit of the seller would be higher.

The features of the warrant

  • The 窩輪 that is affected by price includes related asset price, expiry date, implied volatility, demand, and market supply.
  • The expiry date should be checked that is 3 months to 5 years. But no trading is allowed out of that time. The whole settlement will be with cash, and there will be no stock settlement.
  • The CBBC will have no call price, and investors can hold on until the expiry date.
  • Even if there is expiration in the 窩輪, it can be bought and sold, and there is no need to buy or sell within the expiration.
  • Cash or margin accounts can be beneficial for the trading of all the derivative warrants listed on the Hong Kong stock exchange.

How to choose a warrant?

  • The direction of the stock matters in this case. Buying is depending on the price of the underlying stock increases and decreases and buys if the stock is hopeful and uptight.
  • After that, you have to select the strike price. If you think the stock price will rise in a short time, then you should look at the 10-15% strike price of the subscription certificate. But if you think the stock price is rising, again and again, you should choose smaller out of money or in the money 窩輪.
  • You need to select a 窩輪 with an expiry date of 3 to 9 months, a relatively moderate time price, and low risk. Also, if you want to take 窩輪 for a long time, you have to choose a longer maturity date.

Conclusion

Leverage will be higher because of out-of-the-price or comes close to the date of the warrant. With this, the return will be higher, but the risk will also be higher. If you see the higher implied volatility, you will find a higher 窩輪 price. On the other hand, the high street sell ratio warrants price will be easily affected by market supply and demand. Execution of the transaction is affected by a slow offer or price difference meet.

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