Retail Covered Warrants

Outsider

Junior member
13 0
I don't recommend charting the warrant itself as time decay will play havoc with trend-lines and indicators. Plan your trade on the underlying share and then use an options-/ warrant calculator to determine what the warrant will (might?) be doing for the given scenario.
 

dsmodi

Established member
509 2
Is anybody able to provide info on the difference between a covered warrant and an option? Or maybe somebody knows of a website link that deals with the difference....
 

pateman080

Newbie
8 0
A Covered warrant is issued by a third party who underwrites the issue and makes a market (very tight spreads thus ) and trades on the LSE via your normal broker - also exempt from stamp.

But otherwise more or less the same, using binomial or black scholes to price etc.

Have you seen www.ukwarrants.info?
 

dsmodi

Established member
509 2
I thought that with options u also cannot lose more than your original investment.....
 

pateman080

Newbie
8 0
correct, your downside is limited to your initially invesment and no more.
 

Morris

Well-known member
299 2
Not true.

Options can be bought or sold (written).
A naked short position can be VERY costly. (Just ask a few options sellers around in October 1987...)

Warrants do not allow you to short.
 

Morris

Well-known member
299 2
One the same subject, there's a really good description of an options selling strategy (with actual trades) in John Piper's book "The Way to Trade".

Just re-reading this, plenty of useful information in it IMHO.
 

pateman080

Newbie
8 0
Morris,

With covered warrants you loss is limited to the initial capital invested, so if you invest £1,000.00 in a covered warrant you can not lose any more.

The logic is that a covered warrant confers upon the buyer the right (not obligation) to buy/sell the underlying asset at a set price at a set date. So if the covered warrant is out-the-money at strike you decline the right to exercise and lose only the initial investment.

Further you can go short by buying a put warrant which is the right to sell the underlying asset - hence the put increases as the underlying decreases.
 

Morris

Well-known member
299 2
"I thought that with options u also cannot lose more than your original investment....."

This is what I was referring to.
 
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