Thursday, November 13, 2014

Index call warrants and put warrants listed in Bursa Malaysia

The stock market has gone volatile recently. During a volatile market, sometimes it could be a better option to trade on index warrant, which is a structured warrant that is issued by warrant issuer (such as CIMB, Maybank, RHB, Ambank, Kenanga, Macquarie, etc.) over an underlying stock market index, such as the FTSE Bursa Malaysia KLCI (FBMKLCI, 富时大马指数), Hong Kong Hang Seng Index (HSI, 恒生指数), etc.

There are 2 kinds of index warrants listed in Bursa Malaysia. If you feel bullish on the market, you can look into the call warrants, and if you feel bearish on the market, you can
 on the other hand look into the put warrants.

Each of the index warrants has the following information:

  • Expiry date: You can buy and sell the warrant in the market until its expiry date. Upon expiry, the warrant issuer will pay you money if your cash settlement amount is positive. Else, you will get nothing and your money invested in the warrant will be burnt.
  • Exercise level (a.k.a. strike level): the index points to exercise the warrant. For call warrant, the lower the better. For put warrant, the higher the better.
  • Exercise ratio: this is the leverage element of the warrant. It is the amount of warrants required to exercise one underlying index.
  • Settlement level: the index points on the settlement day.
The cash settlement amount (CSA) is calculated based on the formula below:

where FX Rate is the forex exchange rate to convert overseas index warrant settlement value to RM.

The current index warrants listed in Bursa Malaysia is as below:

It seems like FBMKLCI-HB deserves some attention. You will break even if bought it at RM0.145 and KLCI drops to 1753.50.

Disclaimer: This article is intended for sharing of point of view only. It is not an advice or recommendation to buy or sell any of the mentioned stock counters. You should do your own homework before trading in Bursa Malaysia.


Leap Yet Fly said... Reply To This Comment

Hi. Thanks for a good post relate to a burning question.

The question is the HSICQ going to expire at 30/4/15, if I hold 100 share up to expire date,

my trading account will receive CSA of
((28016.34 -22000)/900)*0.43 *100 =287.45

Am I right?

Leap Yet Fly said... Reply To This Comment

Index warrant has an advantage over normal warrant.
In order to exercise narmal warrant, you have to pay extra money buy under lying stock.
In index warrant, if your warrant appreciate, you get cash directly without needing additional fund.
Am I right?

Voyager8 said... Reply To This Comment

@Leap Yet Fly

They are of different nature and should be viewed as separate entity.

Voyager8 said... Reply To This Comment

@Leap Yet Fly

That will depend on the HSI on the end date.

Jollybee said... Reply To This Comment

May I know which website can I see the real time warrant list like the one in your post?

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