It refers to the capital market instrument, which is a securitized capital market instrument that gives the holder the right to buy or sell the underlying asset or indicator at a predetermined price at a certain date or until a certain date and where this right is used with delivery or cash settlement.
The investor who buys a warrant buys the right to buy or sell that underlying asset, not the underlying asset.
Warrants;
- Securitized version of option contracts;
K It is quoted on the stock exchange and opens on Sunday.
. Traded in the secondary market.
▫ Clearing is done like other securities.
- It is a financial instrument of structured products class.
- It is not a product that the issuer will export in order to obtain capital.
- It is completely under the personal responsibility of the issuer.
- Gives the investor the right to buy or sell a security, a security basket or an index at the determined price level (from the issuer) at the end or before the maturity, in return for the premium paid by the investor.
- The investor who bought the warrant has purchased the right, not the liability.
In order for warrants to be traded on Borsa Istanbul, they must be supported by a market-making activity to be carried out by their issuers or intermediary institutions agreed by issuers. The market maker institution is obliged to place a continuous purchase and sale order (quotation) for a liquid and regular market.
Warrants are products in the class of structured products and with securitized options. Warrants are issued based on a financial asset or indicator. These financial instruments, in which warrants give the right to buy or sell, are called as "basis".
When the instrument to which the right to bond is related consists of a share (one or more), the term “underlying asset” is used, whereas if the instrument to which the right is related is index, the term “underlying indicator” is used.
The “underlying asset” granted by warrants to buy or sell can be a single share or a basket consisting of multiple shares. These shares can be selected from the shares traded on the Borsa Istanbul Stock Market and included in the BIST 30 Index.
Example: Issued by Z Bank and ABC A.Ş. A warrant granting the right to buy its shares on 19.12.2014 from TL 6.00.
Example : Issued by Z Bank and ABC A.Ş. A warrant granting the right to sell their shares on 19.12.2014 at TL 5.00.
Warrants issued based on the index provide cash flow to the owner according to the value of the index to which it is related on a certain date. These indices are stock indices created by Borsa İstanbul.
Example: A warrant issued by the Bank of Z and granting the right to receive the BIST 100 Index from 85,500 points on 19.12.2014.
Example: A warrant issued by Z Bank that gives the right to sell the BIST 30 Index from 83,500 points on 19.12.2014.
Warrants provide the investor with the shares
- Dividend Rights
- The Right to Get New Shares (Pre-emptive Right)
- Right to Participate in Liquidation Balance
- Right to Participate in Company Management
- Voting Right and Right to Information
like rights
The investor who purchases warrants does not get a share, he gets the right to buy or sell the share.
Risks of Warrant Investment:
- Warrants have a certain maturity (their life is limited).
- The possibility of buying warrants due to the leverage effect may work in favor of the market as well as against it, and in this sense, the leverage effect can lead to high gains as well as losses.
- As a result of price movements in the market, all of the money deposited may be lost. However, the risk is limited to the price paid to the warrant and the commission and other fees paid in addition.
- It should be taken into consideration that the technical and basic analyzes to be conducted regarding warrants purchase and sale may differ from person to person and that the predictions made in these analyzes are unlikely to be realized.
It is mandatory to include the risk management policy regarding the risks that the issuer is exposed due to warrant issuance. The prospectus is published on the website of the issuer and market maker in accordance with the Communiqué. The issuer's risk management policy should be carefully examined before an investment decision is made.
Price of the Underlying Asset
There is a positive relationship between the price of the underlying asset and the price of the call (warrant) warrant and a negative relationship between the put (warrant) warrant. As the price of the underlying asset increases, the price of call warrants increases, while the price of put warrants decreases.
Processing Price
There is a negative relationship between the warrant's processing price and the price of the call warrant and a positive relationship between the warrant (put). As the price of settlement (settlement) rises, the price of call warrants decreases, while the price of put warrants increases..
Days to Maturity
There is a positive correlation between the number of days to maturity and both call and put warrants. As the number of days to maturity increases, the price of both warrants (call) and warrants (put) increases.
volatility
There is a positive correlation between the volatility (volatility) of the underlying asset and both the call and put (put) warrants. As the volatility (volatility) of the underlying asset increases, the price of both warrants (call) and warrants (put) increases.
Market Interest Rate
There is a positive relationship between the interest rate and the price of the call warrant and a negative relationship between the warrant of the put. As the interest rate increases, the price of call warrants increases and the price of put warrants decreases.
Dividend (Dividend)
There is a negative relationship between the dividend (dividends) paid by the underlying company and the price of the call warrant and a positive relationship between the put warrant. As the dividends increase, the price of call warrants decreases, while the price of put warrants increases.
Factors Affecting Warrant Price
| Varant Warrant Price (CALL) | Warrant Price (PUT) | |
|---|---|---|
| Price of the underlying asset | + | - |
| Processing price | - | + |
| Days to maturity | + | + |
| volatility | + | + |
| Market interest rate | + | - |
| Dividend | - | + |
