Category: Money tips Release Date: 2007-04-22
Warrants, as the domestic market a new variety of a deal, which was born of financial derivative products will undoubtedly open the door to rich investors, trading strategy to investors, financial means of more flexible and efficient. Practice in the warrants, the warrants are widely used for pricing is the Black-Scholes model, BS model itself, although complicated, but very easy to use them. But not the same as investing in stocks invest in warrants, does not have the right line of the value of the warrants will become waste paper after the expiration of one.
As the domestic market, the first only to warrants, warrants issued Baosteel total of 387.7 million copies, if the warrants listing Baosteel Baosteel price is 4.68 yuan, then the theoretical value of warrants for 0.795 yuan, the total market capitalization of about the flow of about 300 million yuan.
Baosteel Warrants and interpretation of the basic provisions of
Basic provisions of Baosteel Warrants
Securities referred to as Baosteel JTB1
Ticker 580000
Type European Call Warrant issuer of covered warrants
Baosteel
G Baosteel (600019.SH) an exercise price of the underlying securities
4.50 yuan
Row of the right ratio of 1, that is a copy you can subscribe for one share Warrants Baoshan Iron & Steel
Physical delivery settlement
Total amount of 38,770 million copies of issue
Trading period of August 22, 2005 ------ August 30, 2006
Maturity Date August 30, 2006 (duration of 378 days)
Row of the right referred to as ES060830
The right line of code to 582,000
Adjust the terms of the underlying securities ex-dividend, ex-dividend, the exercise price and the right line ratio will be adjusted accordingly
1, define. Warrants is the issuer and the holder of a contract between the warrant holders at the appointed time, the right to agree a price to buy or sell a certain number of underlying securities. Baosteel Warrants on the terms of its specific meaning of, a warrant gives the holder, in and only in the August 30, 2006, is entitled to the price of 4.50 yuan to the Bao Steel Group Baoshan Iron and Steel to purchase shares of its holdings at the moment.
2, Classification. Warrants can be classified according to different criteria categories:
(1) The right to exercise direction, is divided into call warrants and put warrants: warrant entitling the holder to buy the underlying securities, the holders of put warrants have the right to sell the underlying securities, we can see that the Baosteel Warrants being offered for subscription warrants.
(2) according to the exercise period is divided into European and American warrants Warrants: European warrant holders only in the agreed maturity date have the right to the sale of the underlying securities, while the American-style warrant holder at any time prior to the due date have the right to the sale of the underlying securities, we can see that the Baosteel Warrants are European-style warrants.
(3) The issuer is divided into equity warrants and covered warrants: Equity warrants are usually issued by the listed company, its exercise will increase the shares of the company's share capital, covered warrants underlying the securities issued by persons other than the third-party distribution, its acceptability The stock is already against the stock will not cause an increase in the total share capital. Baosteel warrant issuers are not listed Baoshan Iron and Steel Group, Baosteel shares, warrants obtained by the holder of the right line of Baoshan Iron and Steel stocks previously held by Baosteel Group, Baosteel shares, and did not increase the total share capital, so Baosteel Warrants are covered warrants, only But the warrant and overseas standards of covered warrants difference is that overseas issuers of covered warrants are generally the securities company, for the issuers of covered warrants originally have been the subject of securities in circulation in the market. And long is a typical electric warrant equity warrants, the issuer is a listed company China Yangtze Power (600900.SH), warrant holder the right to obtain a long line of electricity is a listed company issuing the stock come, with a total share capital of the right line will also expand .
(4) The exercise price and the underlying relationship between stock market prices, divided into-the-money warrants, warrant price levels and price outside the C of E: If the warrant holders exercise their right immediately have access to benefits, known as the-money warrants, otherwise known as the price of outside the warrants, particularly if the exercise price is equal to the underlying stock price, known as the price level warrants. For example, Baosteel is higher than the price of 4.50 yuan, the price of Baosteel warrant is within the C of E; if the price of Baosteel down to 4.50 yuan, then the warrant becomes-money warrants a; if the price of Baosteel exactly equal to 4.50 yuan, then the warrant is the price level warrants.
(5) by means of settlement are divided into cash-settled warrants and in-kind delivery of Warrants: A cash-settled warrants the right line, only the underlying issuer of securities price and the difference between the exercise price for cash settlement, physical delivery of warrants involves the right lines to the actual transfer of the underlying securities. Baosteel is the physical delivery model warrants warrants, warrant holders the right lines, each of warrants should be subject to payment of 4.5 per Baosteel Baosteel Group's shares from the accounts transferred to the warrant holders of accounts.
3, characteristics. Baosteel Warrants by a warrant has the general characteristics, some of which features and other securities is very different species, required the attention of investors attention, such as timeliness, high leverage, etc.:
(1) The highly leveraged nature: Warrants are derivative financial products, one of positive share price premium is only a small part of the high leverage, the leverage ratio the greater the leverage effect that the greater the risk of their profit and loss is also larger; On the contrary, the smaller the leverage ratio that the smaller the leverage effect of its profit and the risk of loss is also smaller. One day, such as Baoshan Iron and Steel 4.6 yuan, warrant price 0.74 yuan if the next day, shares of Baoshan Iron and Steel rose 5 percent, then the warrant price should be at this time was 0.90 yuan, an increase of 4.32 times the rise for Baosteel; if Baosteel shares fell 5 percent the next day, then the At this time warrant price should be 0.59 yuan, a decrease of 4.05-fold decrease in Baosteel.
(2) timeliness: Investors like the sale of shares in the long term holders of warrants, warrants with a survival period, the warrants expire after losing its effectiveness. Warrants expire if not a line of the right value, investors will lose its initial price of warrants to purchase gold. For example, an investor bought a Baosteel warrants, held to maturity, the Baosteel's price is lower than exercise price, then the investor will lose all the investment, even if the due date Baosteel rose also has nothing to do with investors.
(3) risk is limited, profit-infinity: Warrants, if not before the expiration of the right of a line of value or a holder for the exercise, and its maximum loss is only paid when purchasing the right to grant warrants, so the risk is limited. In prior to maturity, such as the underlying stock price rises, then the warrant price will go up because of the underlying stock price may be an unlimited rise in earnings and therefore warrants are endless.
4, transaction. Baosteel warrants and stock trading methods basically the same, but the difference between the following rules should be noted:
(1) Prior to the purchase warrants, investors need to sign "business risk warrants reveal the book." Currently, only including Guotai Junan, including 63 brokerage business qualification with a warrant, which means that investors in the sale of warrants can only be carried out by the 63 broker, and investors in the share reform of Baosteel receive the warrants may be sold at any broker out.
(2) T +0 transaction: the date of purchase of the warrants, the day can be sold.
(3) Price Limits: Up decline in the prices of warrants by the following formula:
Warrants or the price = closing price the day before the C of E + (the date of the underlying securities or the price - the underlying stock's closing price the day before) × 125% × line power ratio;
= Warrants Warrants Price declines the previous day closing price - (underlying stock closing price the day before - the day the underlying securities decline in price) × 125% × line of the right proportion, when the calculation is less than zero, the warrants decline in the price to zero.
For example, the previous trading day Baosteel and Baosteel Warrants were closing price of 4.6 yuan, 0.74 yuan, then this trading day, the daily limit price of Baosteel Warrants = 0.74 + (4.6 × 1.1-4.6) × 125% × 1 = 1.315 Yuan , or is limited to 77.7%, the lower limit price of Baosteel Warrants = 0.74-(4.6-4.6 × 0.9) × 125% × 1 = 0.165 yuan, limited to 77.7% decrease. Of course, Baosteel warrants each trading day price limit may be different.
(4) warrants Abbreviations: C of E referred to as the word commonly used 8-bit (four characters), p. 1 to 4 character spaces with Chinese characters, Pinyin, or numbers indicate the underlying securities, the first five to six words with two bits uppercase letters issuer, 7-bit word with a letter B or P said the subscription or put the first 8-bit word with a number or letters to the underlying securities issued in the first few warrants, when more than nine hours with the A to Z, said the first 10 to 35. For example, "Baosteel JTB1", the "Baosteel" indicates that the warrant is the subject securities Baosteel, "JT" indicates that the warrant issuer is Baosteel Group, "B" indicates that the warrant is a warrant, "1" indicates that the warrant is a with Baosteel as the underlying securities, warrants only the first. Investors a better understanding of the warrants naming rules, you can be referred to some basic information about warrants.
(5) line of the right: Baosteel warrants only in the August 30, 2006 OK power, warrants number of rows of the right to declare an integer multiple of 100, the right to declare the date line instruction, the effective date of the day can be withdrawn on that day to buy warrants, the right of the day can manage the day to achieve the right line of Baoshan Iron & Steel, the second trading day before they sold. Baosteel Warrants due to their physical delivery, which is not automatically the right line, investors line power, the power line must be declared. For example, a 1000 investors need to exercise the warrants, then the capital account must ensure that there are 4,500 yuan in cash (assuming an exercise price not adjusted), and then bought 5.820001 billion copies.
Row of the right referred to as the 8-bit characters (four characters): the first a word bits in capital letters A or E line, said American rights or European-style row of the right; the first two words in capital letters S or the bits that line the right of C use of securities or cash settlement payment; paragraphs 3 to 8 characters bit by using 6-digit date that warrants expired. For example, "ES060830" said the warrants the right of way line of American-style, line the right to payment for the securities settlement means that the warrant expiration period of August 30, 2006.
Baosteel Warrants Pricing
Practice in the warrants, the warrants are widely used for pricing is the Black-Scholes model, the model in overseas options, warrants the development of the market for decades has been tested and was confirmed to be mature and effective.
The value of warrants by the BS model to determine why the
BS model is risk-free arbitrage by the principle of derivation has come from the so-called risk-free arbitrage to say, if the price warrants a departure from the calculated values of BS model, there is risk-free arbitrage opportunities arise, without the risk arbitrage process will make the price of warrants to the BS model regression calculated theoretical value. This is because the warrants as a derivative product, which can by holding certain bonds in the form of the underlying securities and copy them, but also can reverse the process through to hedge their risk.
However, the real market imperfections in some of the factors that will make the price of warrants deviation from BS model calculation of the theoretical value, not perfect main factors including transaction can not be continuous, there is the cost of hedging and transaction costs, which is foreign to the true volatility of warrant prices rate, the BS value of 20% -30% of the reason. In particular, the present mainland market is not yet short. Therefore, the prices of warrants can not be completely determined by the BS model, is still determined by supply and demand, but the BS model calculation of the theoretical value of the absolute with a reference value.
c is the theoretical value of Call Warrants: S is positive stock price; N (x) for the cumulative normal distribution; X for the exercise price; Tt for the remainder of
BS model application easy
BS model itself admittedly complicated, but using them is very simple, many websites provide a warrant calculator, for example, www.chinawarrants.com, investors need only be related to the parameters input.
Warrants Price Calculator (Black-Scholes model):
Enter the above parameters, you can get the theoretical value of Baosteel Warrants 0.795 yuan.
Parametric Analysis
The following pairs of BS pricing model in a few parameters are introduced.
(1) the underlying securities at current prices. This parameter is the calculation of the price of Baosteel, Baoshan Iron and Steel is clearly warrant price and the price of Baosteel close positive correlation.
Volatility in the Baoshan Iron & Steel 0.30, risk-free rate of return of 6%, the remaining period of 378 days, the value of warrants and Baosteel Baosteel price relationship.
(2) The volatility of the underlying securities. On the warrants, the underlying securities, volatility is an important factor affecting the value of one. The greater volatility of the underlying equity prices, in the maturity of the possibility of breaking an exercise price of the greater, thus the greater the value of warrants. There are two common volatility: historical volatility and implied volatility.
Historical volatility is to use data on past stock price volatility calculated values. Calculated as follows: First, from the market access to the underlying securities in the fixed time interval (eg daily, weekly or monthly, etc.) on the price; Second, for each time period, find the stock at the end of the period with the time beginning of the price of the natural logarithm of the ratio; and then find the standard deviation of these pairs of values, multiplied by the number of one-year period contained in the square root of (for example, select the time interval of a day, then if the net closed in each of the there are 250 trading days shall be multiplied by), obtained shall be the historical volatility. Calculated in this way the volatility of the past year, Baosteel rate of 0.305, and many Quotes statistical software will reveal the historical volatility of the securities, investors generally do not own calculations.
Implied volatility is the price of the warrants into the BS model on behalf of anti-calculated, and it reflects the future investors in the expected volatility of the underlying securities. Currently on the market no other Baosteel warrants, it is not Baosteel warrants implied volatility data, then the investors warrants in the calculation of the theoretical value of Baosteel, you can refer to the historical volatility. Under normal circumstances, the stock volatility as an attribute, not easy to change much. Baosteel Warrants historical volatility over the past year rate of 0.305, if investors expect the volatility of the future rate of Baosteel increase or decrease slightly, then the historical volatility can be based on the appropriate increase or decrease in volatility as input calculator parameters.
Price of 4.68 yuan in Baosteel, risk-free rate of return of 6%, the remaining period of 378 days, Baosteel Baosteel warrant value and the relationship between the volatility in the coming year.
(3) The remainder of the period. Warrants prior to maturity, its market value, including embedded value and the time value of two parts. The intrinsic value is the price of the underlying securities with an exercise price of the difference between the two, namely, the value of immediate exercise their rights. Suppose Baosteel 4.68 yuan, Baoshan Iron and Steel warrant price of 0.795 yuan, then the intrinsic value of the warrants for the 4.68-4.5 = 0.18 yuan, 0.615 yuan shall be the remaining time value, even if the price Baosteel constant, the time value will also be with the the passage of time gradually reduced, and the more close to expiration, the faster the time value of loss.
Price of 4.68 yuan in Baosteel, volatility rate of 0.30, risk-free rate of return of 6%, Baosteel warrant value and the remaining term relationship.
(4) risk-free rate. Baoshan Iron and Steel investors to buy warrants, to some extent can be seen as the financing to buy shares of Baoshan Iron and Steel, then the financing rate is generally regarded as risk-free interest rate, risk-free interest rate short-term changes in the probability of smaller value of the warrants, such as the impact of not more than Big three parameters.
Price of 4.68 yuan in Baosteel, volatility rate of 0.30, the remaining period of 378 days, the value of Baosteel warrants the relationship between risk-free rate of return.
(5), exercisable at a price. Baosteel warrants exercisable at a price only in the ex-dividend or ex-dividend only when adjusted by the following formula, otherwise it is 4.5 yuan.
A, ex: the new exercise price = the original exercise price × (Ex-Japan reference price of the underlying securities / ex-dividend closing price the day before the underlying securities); new line of the right ratio = ratio of the original line of the right × (ex-dividend day before the close of the underlying securities Price / Ex-date reference to the underlying stock price).
B, ex-dividend: the right line of the ratio remains unchanged, the new exercise price = the original exercise price × (reference price of the underlying stock goes ex-dividend day / the day before ex-dividend closing price of the underlying securities).
(6) The dividend rate of return. Because dividends, the Baosteel warrants exercisable at a price adjustment, under normal circumstances, have little effect on the value of the warrants, so dividend yields generally set to 0.
Baosteel Warrants investment and other concerns
Relationship between supply and demand warrant price of Baosteel
In theory, the price of Baosteel warrants should be the trend of Baosteel decision, but taking into account current market factors, the presence of imperfections, arbitrage mechanism is not yet functioning well, warrants supply mechanisms are not quickly bear fruit, so Baosteel Warrants the price to a large extent still market supply and demand relations.
Baosteel Warrants issued a total of 387.7 million copies, if the warrants listing Baosteel Baosteel price is 4.68 yuan, then the theoretical value of warrants for 0.795 yuan, the total market value of about 3 billion yuan in circulation, as is currently the Baosteel Warrants China's first and only one warrants only, coupled with its high-leveraged, as well as can be T +0 transaction, so there may be in short supply situation.
If there is such a situation, will result in warrant price is higher than BS model calculation of the theoretical value, or is the cause implied volatility increases.
In order to prevent the price of Baosteel warrant deviation from its value, the Shanghai Stock Exchange in the trading system was the appropriate arrangements, such as "Interim Measures on Management Shanghai Stock Exchange Warrant" 29th article stipulates that "the warrants have been traded, qualified institutions can the creation of the same kinds of warrants, "while according to the" Interim Procedures "of the relevant provisions of the qualified securities companies and other organizations may also be at the right time to issue additional shares of Baoshan Iron and Steel covered warrants, which will virtually increase the supply of Baosteel Warrants hidden.
In addition, Baosteel warrants trading also introduces the primary dealers, which undoubtedly will also have to maintain price stability warrants play a role.
Implied volatility measure of price level warrants
Warrants Market in overseas securities, warrants on the same subject may have as many as hundreds of the future, the Chinese market may also happen that, for example light Baosteel, may have a different issuers, different exercise price, different expiration date of the warrants dozens of many, that there is only one indicator can be measured which warrants a lower price, more worthy of investment? implied volatility is one such indicator. For example, Baosteel price of 4.85 yuan, the following two Baosteel warrants, although the price of Warrants A warrant is higher than B, and the premium ratio (the number of Baosteel rose to exercise warrants in order to preserve capital; Warrants A, B represents a premium of 11.65%, respectively , 8.35%) is also higher than the C of E B, but in fact Warrants A warrant B than cheap. A, because the warrants implied volatility of 30%, while the B warrants implied volatility of 32%, the price of warrants A higher than B because of its remaining long-term. (See Table 2)
Not only by the warrant price of the underlying security price effects of changes in implied volatility will also affect the warrant price. Therefore, Baosteel warrants only after the transaction, investors can also use the implied volatility of investment to do for their own guidance, using the method are: (1) the sale of volatility. Investors in addition to the use of warrants is expected to change in the direction of Baosteel to buy and sell warrants, but also from the volatility of stock price changes in profit. In general, the fluctuation rate is not infinite and up or down, but back and forth within a range of shocks, such as the evidence indicates that Taiwan's volatility index warrants generally varied between 20% -55%. Investors could take the implied volatility is low, when to buy and sell warrants at a higher way of profit. (2) compare the historical volatility to determine the timing of the sale. If the investor has already decided the direction of the trade can be historical volatility and implied volatility for comparison, in the implied volatility is low (high) volatility in history when the buy (sell) warrants.
Generally speaking, when the implied volatility over historical volatility Very often, when the price of warrants were overvalued on the contrary, when the implied volatility is often lower than the historical volatility, there is underestimation of the price of warrants, investors should be pay close attention to changes in implied volatility.
Can not be the same as investing in stocks Investment Warrants
Many investors trade in securities, such as an investment habit, that is, hold-up, after waiting for some sort of relief will no longer operate, or continue to cover their short positions. This strategy investing in warrants is very taboo, because the stock as long as no delisting, there is always hope for some sort of relief, while the warrants have a time-sensitive, passed after the expiration date, it automatically withdraw from the market, and does not have the right line of the value of warrants will become waste paper after the expiration of the one.
Therefore, Baosteel will determine if the investor or callback sideways for some time, it should sell the Baoshan Iron and Steel warrants, etc. after the purchase is completed to determine the callback order Baosteel warrants, it can avoid the unnecessary loss of time value, even if the hold-up is also timely stop; if investors warrants to determine the time remaining within the price of warrants into the probability is extremely small, in general it should be sold as soon as possible warrants, so as not to be losing the time value, of course, at this time warrants a low value, a larger risk appetite investors can also take full advantage of the high leverage at this time, to get the underlying stock price soared (or fall) in earnings.
Nominal and effective lever lever
Nominal leverage ratio, also known as holding ratio or zoom ratio, refers to an underlying stock price can be purchased in multiples of the number of copies of warrants, the nominal leverage ratio = market price of the underlying securities / (warrant price / row of the right ratio). For example, Baosteel price is 4.68 yuan, warrant price is assumed to be 0.795 yuan, then the name of Baosteel warrant leverage ratio at the moment is 4.68 / (0.795 / 1) = 5.89 times.
But the name does not truly reflect the leverage ratio of magnification, such as the extreme price of external circumstances, the nominal leverage ratio is very large, but it is far from magnifying the name of leveraged so much.
Therefore, the nominal leverage ratio multiplied by the delta (Delta), to reach effective leverage, for the analysis of warrants magnification more efficient, and effective leverage ratio = nominal leverage ratio × delta.
Among them, Delta (Delta) means that when a unit of the underlying stock price movements, the warrant price change coefficient, used to calculate the prices of the securities underlying the impact of changes in the price of the warrants. Delta that is BS formula N (d1) 1. For example, Baosteel price is 4.68 yuan, warrant price is assumed to be 0.795 yuan, then the Baosteel warrant leverage ratio of the effective moment 5.89 × 0.686 = 4.04 times. This shows that the basic Baoshan Iron and Steel rose 1%, at this time warrant the theory of Baosteel prices should be up about 4.04%. Of course, the nominal effective lever leverage and are from time to time change.
Warrants, as the domestic market a new variety of a deal, which was born of financial derivative products will undoubtedly open the door, it would greatly enrich investors, trading strategy, investors will be more flexible and efficient financial management tools. The above description, only play the role of attracting valuable opinions, and more on the warrants investment technique, trading strategies and tips, you will need investors to gradually explored in practice.
