Category: Money Tips Date: 2006-07-02
China Securities Regulatory Commission has approved the Fund may invest in split share structure reform initiatives appear warrants products, while Baosteel Warrants are traded on the Shanghai Stock Exchange yesterday. Investors how to deal with this fresh financial strain? Executive Deputy General Manager of China Merchants Fund Management Co., Ltd. Long War, said recently that investors need to grasp the following four principles of warrants. He said the warrant is a kind of leverage with the high-risk financial securities products, investors should be treated with caution.
First, we must strictly control the investment in warrants positions. Warrants a higher risk species, can not warrant the same position in the stock position to look at, in particular, should avoid all of the funds are invested in warrants. Otherwise, good luck, of course, when a considerable profit, but if the direction of wrong judgments, losses will be relatively large; Hong Kong Securities and Futures Commission has issued a "Code on Unit Trusts and Mutual Funds", the provisions of unit trusts and mutual funds can invest in identified warrants and options. Hong Kong has issued warrants equity investments of the Fund's investment fund net asset value of the amount usually accounts for 3% to 5%. Meanwhile, the regulations also fund investment options, warrants and to make certain restrictions. Such as requiring plans to invest in warrants and options for hedging purposes. In addition, the regulations also made short selling restrictions on such acts.
Second, the investment warrants should strictly follow the stop-loss principle, once the stop-loss should promptly withdraw from below and not wait for some sort of relief, or try to cover their short positions through the low share of low-cost. The reason is that the principle of strict stop-loss: first, when the warrants are deep out of the money, its price sensitivity will be greatly reduced, unless the underlying securities rebounded sharply, or almost no sort of relief possible; Second, the warrant value will decrease over time Therefore, a passive position to wait is often worth the candle.
Third, the warrant is more suitable for short-term investments as a species, position time normally should not be too long. As the warrants prone to sharp price fluctuations, thus the need for close attention to post-purchase warrants and the warrant itself, the underlying securities price movements, if not always stare plate, it should try to avoid investing in warrants.
Fourth, to warrant investment can not "get petty." In other words, do not just because the price of a warrant to buy low away. For some the price is only a few cents of the warrants (generally out of the money warrants), usually contains a great risk. As time goes by, unless it is the underlying prices of the securities substantially within a short inversion.
