Category: Money Tips Date: 2007-08-06
Many people put warrants as a high-risk products, However, some people make the C of E into a risk-free arbitrage tool.
Huang Wenqing in doing such a thing. As announced yesterday, shares of Wuhan Iron and Steel, "Put + subscription" a combination of warrants program, he realized that warrant arbitrage opportunities may be coming.
"In fact, the C of E is a very beneficial species carry trade. However, if there is only a one-way warrants, real risk-free arbitrage is difficult to achieve. Because the risk-free arbitrage is the first to circumvent the directional risk, in the absence of a mechanism for short, this point difficult to achieve. "Huang Wenqing said," The birth of warrants combination provides a two-way tools, improving the market arbitrage mechanism so that the increased possibility of arbitrage. "
Huang Wenqing Guotai Junan is the new product development department of a researcher. Two years ago, the Department of Guotai Junan development of new products began to study a variety of financial derivatives and arbitrage strategies, now many of their vision has become reality, such as ETF and warrants.
Wuhan Steel shares a combination of warrants so that they are very excited about the program. Baosteel warrants because the combination of the program die, they finally found a suitable substitute. Baosteel Warrants in the initial design, is a "two copies of call warrants were put warrant +5" formula, but has been the opposition of shareholders of tradable shares into a one-way warrants.
Guotai Junan in the development of new products on the use of the Department of the concept of arbitrage portfolio warrants, it is necessary to use three tools: call warrants, put warrants and the corresponding stock. Specifically, is to use "put warrants + stock" to constitute a warrant the same risk-return characteristics of the combination of using the combination and warrant arbitrage price differences between the.
Huang Wenqing explained that if the same time, buying a put warrant, and a share of stock, in fact the equivalent of buying a warrant. With Wuhan Iron and Steel, for example, the put warrants the exercise price of 3 yuan, assuming that at this time share is 2.8 million put warrants the price of 0.2 yuan, then buy the two species at the same time, investors will profit and loss curves how are we doing?
Clearly, in less than 3 dollars when the share price, investors do not always make, instead of losing, because the share price up, put warrants will lose money, on the contrary, they fell, put warrants will be to make money. And if the stock rose to 3 yuan, investors will make money, because at this time put warrants have fallen to 0, will not offset the rising part of the stock.
As such, buying such a combination is equivalent to shares of Wuhan Iron and Steel acquired a warrant, the warrant is exercisable at a price of 3 yuan, while the price is 0.
If in the above example, the put warrant the price is 0.4 yuan, then construct the portfolio of investors bought the equivalent of a price of 0.2 yuan warrants, investors break-even point has been raised to 3.2 yuan.
If the warrants at this time on the market price of Wuhan Iron and Steel 0.3 yuan, then by buying a "put warrants + stocks" portfolio, while selling a call warrants, investors can get 0.1 yuan risk-free return; if Wuhan Iron and Steel warrants the price of less than 0.2 million investors through the opposite operation to arbitrage.
"This is only a simplified model," Huang Wenqing said, "In fact, the Wuhan Iron and Steel of the call and put warrants is exercisable at a price is not the same, and arbitrage also need to consider this factor would be more complicated." ( Your opponent on the price of the stock held by the program satisfied? you think a reasonable price should be the right number? - soon send short �letter to vote! write "JF01 or JF02", 01 on behalf of "satisfactory", 02 stands for "not satisfied." mobile users send to 2.9116 million + stock symbol (eg, 2911600600104), China Unicom users send to 9.9016 million + stock code)
He noted that the warrants can be viewed as trading is essentially trading volatility. All of the arbitrage, are established on the volatility rates on the basis of calculation and comparison. With a richer variety of warrants in the future, a variety of arbitrage means, such as warrants and underlying shares of arbitrage between the subscription and put the arbitrage between the different warrant exercise price arbitrage between the different maturity arbitrage between the warrants, and even more complex arbitrage strategies, can be in the buy low sell high volatility of the basis.
