Category: Money tips Release Date: 2007-08-04
The current round of share reform program, the four central enterprises in Major Holders I threw in the warrants. Baosteel Warrants intense speculation since it went public, investors look forward to the rest of the C of E have some fun when listing.
Share reform program to send warrants, is typical example of financial engineering. Major shareholders to give the outstanding shares of the interests of shareholders in exchange for distribution rights, which benefits are to be given by the largest shareholder, may also be given to third parties. The first round of share reform pilot enterprises to major shareholder Major Holders to send sophisticated methods to support the interests of all by the major shareholders. The central part of the current round of stock prices to change in order to give the ticket warrants, is the majority shareholder does not cost anything and the circulation of shareholders can benefit directly because the warrant has a price and outstanding shares of shareholders can cash in the market.
Major shareholders to tradable shareholders, get free warrants (Baoshan Iron and Steel, long electricity, Wuhan Iron and Steel) is a major shareholder to the market information, I believe that the stock in the duration of the expiration date should be above the conversion price. Large shareholders to tradable shareholders to share a put warrant (New Steel and Vanadium, Wuhan Iron and Steel), then is to give shareholders the information flow, I believe the stock will not be in existence during the period under the put price. Subjective views of whether the shareholders agree, the market be addressed.
The four central enterprises launch warrants, to make people understand warrants and put warrants, respectively, as well as European and American warrants warrants difference. European-style warrants can only be survival of the end of the exercise is the duration of the American-style warrants can be exercised at any time. Traditionally, warrants are European, because Europe, the United States warrants the duration of the value of the same. The reason is simple, when we duration of the exercise of American-style warrants, we are giving up time value of the warrants. Therefore, even if the exercise price at the current stock price, we are in the market will only sell this American-style warrants in cash, or held-to-zero time value of the warrants (ie, the survival end of the period), the Caixing their option.
However, put warrants are not the same, the value of American-style put warrants will be higher than the same conditions, European-style put warrants. If the duration of the current stock price under the put, rational investors will immediately exercise the put right, when American-style put warrants the time value is zero; but European-style put warrants can not exercise, its time value is negative value.
Warrants that the value of derivatives is based on changes in prices of related securities, generally are based on BS option pricing model or two Yoshiki option pricing model to value. This valuation approach involves two kinds of statistical concepts, retail investors is not easy to understand. But what happens to warrant the price factors, is the basic knowledge, the sale of warrants must understand one-China relations. One more significant factor is the current stock price, volatility, interest rates, dividends and duration.
Shares are now easier to understand. Current stock price rise, the opportunity to increase the exercise of warrants, warrants to follow the price rise, while prices of put warrants fell. Duration are relatively easy to understand, the longer the duration, regardless of subscription or a put warrant, the greater the chance for their exercise price is also higher. Thus, if market conditions remain unchanged, the price of warrants decreased over time. The impact of interest rates is the time value of money. Warrants are traded in the future exercise of a right, if interest rates rise, the right to subscribe will be even more valuable, but it does not help put the right to put warrant the price will fall. The impact of dividends on the warrants and the interest rate is the opposite. Warrants to subscribe for or put prices are based on "ex-dividend" basis, the dividend increase, after the ex-dividend stock price fall would become bigger, the warrant price will fall, while the put warrant the price will rise.
The above four factors are relatively easy to understand. Volatility is the retail investors easy to ignore. Volatility reflects the volatility, usually in return for the standard deviation to represent the volatility. If the stock price volatility increases, that is, fluctuations in stock prices have increased, then the duration of the exercise price or the stock price hit a chance to put price increases. Therefore, volatility increases, warrants and put warrants the price will rise. China's Hong Kong, Germany, thriving market for trading these warrants, warrants a lot of speculators, that is, the "volatility speculation" to make money.
Warrants is always leveraged products and high investment risks involved in this market, must do risk management.
