Retail Covered Warrants


Junior member
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.


Established member
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....
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


Well-known member
One big difference is that you cannot write warrants.


Well-known member
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.


Well-known member
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.

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.

I was referrig to covered warrants when I said the downside was limited


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

This is what I was referring to.


Established member
i think with options, there are 2 types: call and put options.
And within these, there are 2 further choices (options :) ) : buy and sell.

So, from these 4 combinations of options, 2 have limited downside, and 2 have unlimited downside. That is my understanding, but is anybody able to confirm which is which?

With covered warrants, there is limited downside as they can only be bought. Either a call covered warrant or put covered warrant can be bought.

This seems to be the general difference between options and covered warrants.


Well-known member
A short options position has unlimited downside.
A long is limited to the premium paid for the option.

I recommend read "Options Plain & Simple" by Lenny Jordan.

Covers basics, spread trades - straddles, strangles, butterflys, condors..


Active member
The "no trading online" ruling by the FSA apparently only applies to ComDirect - not at all apparent why this is, and they're endeavouring to get the ruling overturned. Real PITA, ComDirect are not the fastest to deal with on the phone.


Junior member
NOW: International Equities

SG have added IBM, Microsoft, Yahoo, Cisco and Nokia to the list of underlying equities on which they have warrants.

They also listed some warrants on the DAX and S&P500

Go fetch: UKWarrants' WarMap

The warrants have very tight spreads ! :)
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