| April 2008 - What is precisely a warrant? |
A warrant is a marketable security traded on the stock market which gives its owner the right, but not the obligation, either to buy (in which case it is a call warrant) or to sell (a put warrant) a given security (the underlying) at a pre-determined price (strike price) on a pre-determined date (expiration date).
Direction: calls are used in bullish scenarios and puts in bearish scenarios.
Underlying: the security to which the warrant confers a right, e.g. a share, an index, a commodity or a currency. Calyon's range of warrants covers many French indexes and equities.
Term: also called the expiration date, the term of a warrant corresponds to the date it ceases to confer any rights. Unlike a share, a warrant has a pre-determined life when it is issued.
Strike price: set by the issuer at the time of issue, the strike price indicates: - for a call, the price at which the investor can buy the underlying security;
- for a put, the price at which the investor can sell the underlying security.
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