Category: Money tips Release Date: 2006-10-03
Are now actively developing, will launch this year's Shanghai 50ETF warrants products to attract the attention of many investors. 50ETF warrants exactly what kind of products? It will bring to the market launch of what kind of impact? How can investors participate? With these questions, this reporter interviewed yesterday involved in product design Guotai Junan Securities Company, Huaxia Fund Management Company's relevant experts.
Warrants will be significantly active in 50ETF Trading
According to reports, the Shanghai 50ETF warrants product is a kind of covered warrants, the issuer is the securities company. Products agreed within a certain period of time in the future investors the right to purchase at the prices agreed number of copies of 50ETF, investors, issuers must therefore be paid to the cost of access to the right. For example, the current design of the 50ETF warrants, a warrant to purchase 10 copies of the corresponding ETF rights, warrants duration of six months, investors can only half a year after the expiration date of the right line (known as European-style warrants. If investors in six months can be any day within the exercise of their rights, that is, American-style warrant). The issuer a certain price in the market ETF issued warrants to obtain certain rights to payment of income, but also assumed the agreed price due to the right person to sell a certain share of the obligations of ETF. Therefore, the issuer in order to cope with this future share of the ETF may be required, as well as to hedge the risk of its implied need to purchase a certain number of ETF shares as stock in a ratio of about 1:0.6. That issuers 100 million copies of warrants, corresponding to 1 billion copies of ETF shares, the issuer should use the 600 million copies of ETF as a share of stock.
According to experts, unless the ETF secondary market liquidity appear abnormal or unusual price premium, the Issuer generally will choose to purchase ETF shares in the secondary market, but less likely to adopt a basket of equity redemption of ETF shares a way. This is basically not directly on the ETF Fund's total share of the changes caused by increase or decrease. However, because the warrants issued, the issuer will be a substantial increase in the demand for ETF shares, which is the new demands, their buying behavior ETF will trade in a premium state of the existence of arbitrage mechanism in order to make a basket of shares of arbitrageurs purchase ETF shares and sell in the secondary market to increase the supply of ETF. This has indirectly led to increase in ETF shares.
On the other hand, the issuers buy ETF shares, the Change will be based on market conditions to adjust its inventory ETF, which also makes ETF trading more active.
Fluctuations are several times larger
As a new financial tool that warrants the secondary market trading of the most characteristic is undoubtedly a topic of concern for investors. According to experts, 50ETF volatility of warrants will be substantially higher than the 50ETF own volatility. For example, if 50ETF warrant is exercisable at a price and the current 50ETF the same price, then, 50ETF's share price is 0.8 yuan, corresponding to the C of E is 0.8 × 12% = 0.096 yuan, up 5% if the 50ETF warrants will be priced at likely to rise 24%, its rise will likely be 50ETF is stocks rose nearly five times the volatility of volatility is far greater than the underlying shares. Moreover, its also much faster speed of the waves. For small investors, it will be a high-risk, high-yield products.
However, the experts, the Warrants not so much an investment tool, as it is risk-management tool. It can also be a low-risk product protection. For example, can make use of warrants Design Preservation Fund: the vast majority of the assets to buy bonds, only the yield to maturity of the asset investment is expected to warrants, the worst case is part of the investment warrants total loss, but this does not affect the overall maturity of capital preservation. Of course, this is just an example of warrants product applications, there are many other features can be developed. Based on the same 50ETF, the issuer may issue a different set of products, such as the design of different exercise price, availability of different warrants, which warrants a far cry from the value.
The success of the two criteria warrants product
According to experts, the success of warrants product has two standards, followed by positive stock price of one warrant (50ETF) price volatility, and second, active trading. Does not warrant the price fluctuations of natural fluctuations in prices on the direction and pace of 50ETF consistent, inconsistent, also does not necessarily actively traded, so the importance of product and system design. In product design, 50ETF is a good subject index, there is a smaller tracking error, the corresponding 50ETF funds should also be a reasonable size. Currently employing more than 100 million copies of 50ETF, 100 million copies of the C of E corresponds to 1 billion copies of ETF shares, within reasonable limits, does not warrant and is being adversely affected stock liquidity. Because if the size of the C of E is too large, the issuer will hedge the risk of being a corresponding increase in demand for shares, which will affect liquidity. Are based on the same stock (such as 50ETF) a group of warrants product, the total size of the total underlying shares could reach 20% -30% the size. In the system design, the current trading system is designed to protect the market maker system, which has basically identified with the warrants will be introduced in parallel.
Issuers are also at risk
For the issuer, the introduction of warrants issued warrants product revenue is the right to payment of income, and undertake corresponding obligations because of risk. For example, issuers need to hedge the risk of buying a certain 50ETF share. If after the volatility is too large, the measures taken to adjust the cost will rise. Moreover, in the relevant model, the underlying volatility of the adjustment measures taken after a certain range of target setting, but also so that the issuer will bear the risk of buy low and sell high. Right setting and adjustment of this model is to reflect the issuer risk control capability and level places.
