Inline Warrant
  • 界內證攻略 第一節
    兩分鐘學懂界內證
  • 界內證攻略 第二節
    影響界內證價格的因素
  • 界內證攻略 第三節
    如何選擇界內證條款?
  • 界內證攻略 第四節
    首批相關資產全攻略?
  • 界內證攻略 第五節
    界內證的結算方法
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II.The Main Feature of Inline Warrants

Strikes

Each Inline Warrants have its upper and lower strike prices. The minimum range between upper and lower strikes of index Inline Warrants and single equity Inline Warrants are 5% and 15% respectively. In-the-range means the price or level of an underlying asset is at or falls within the upper and lower strike prices or levels.

Implied Volatility

The implied volatility is the expected volatility of the market for derivative warrants, inline warrants and the underlying assets at a specific time. The historical volatility of the underlying assets is one of key reference factors as well as one of the main factors affecting the prices of inline warrants. Issuer will refer to historical volatility, liquidity of listing and over-the-counter options, and market supply and demand when determining the prices of inline warrants. Unlike the inverse relationship between implied volatility and derivative warrants, the prices of inline warrants can go up or down when the implied volatility rises, depends on whether the prices or level of an underlying asset is in-the-range or out-of-the-range.

Expiry

The Inline Warrants may be issued with a lifespan of 6 months to 5 years. Similar to derivative warrants, the expiry date is the date on which the holder would be entitled to exercises the rights. Inline Warrants in Hong Kong follow the European style, in which the holder could only exercises the rights at the expiry date. Inline Warrants would be settled and delisted after expiry.

Last Trading Day

Inline Warrants could be traded in the secondary market before it expires. Normally, the last trading day is the 4th trading day prior to expiry.

Gearing

The ratio showing the theoretical change in the price of Inline Warrants per 1% change in price of the underlying asset.

Entitlement Ratio

The entitlement ratio of Inline Warrants is equal to one because the payoff is either HK$0.25 or HK$1 and independent to entitlement ratio.

Premium

Premium is the percentage of the difference between the price and the intrinsic value of Inline Warrants. It indicates the breakeven level for a Derivative Warrants, however, there is no breakeven level for an Inline Warrants as the payoff of an Inline Warrants is either HK$0.25 or HK$1.

Premium = (Price of Inline Warrants – Intrinsic Value) x 100%

Negative Premium: If the Inline Warrants is in-the-range at the expiry, the premium is always zero.

Positive Premium: Positive Premium occurs when an out-of-the-Range Inline Warrants is traded above HK$0.25. If the Inline Warrants remain out-of-the-range at the expiry, the premium would turn to zero.

Hedging Ratio

Hedging ratio represent the theoretical change in the price of Inline Warrants per the change in price of the underlying asset. Assuming the other factors remain unchange, the hedging ratio increases when the day to maturity decrease. Also, the hedging ratio is higher when the price of underlying asset getting closer to the strike prices.

Negative Hedging Ratio: Negative hedging ratio occurs when the price of underlying asset is higher than the middle price (the middle point between upper strike and lower strike) of the Inline Warrants. It means the price of Inline Warrants decreases when price of underlying asset increase.

Positive Hedging Ratio: Positive hedging ratio occurs when the price of underlying asset is lower than the middle price of the Inline Warrants. It means the price of Inline Warrants increases when price of underlying asset increase.

Effective Gearing Ratio

Effective gearing ratio of Inline Warrants could be negative when the hedging ratio is negative. For instant, if the effect gearing ratio of an Inline Warrants is -10, then the price of such Inline Warrants would decrease by 10% when the price of underlying asset increase by 1% given other factors remaining unchanged.

Effective gearing ratio is affected by the price of underlying asset, hedging ratio, change of time value and implied volatility.

The information on this material is provided and published by Haitong International Securities Company Limited (“HTI”), a corporation holding licences for Type 1 (dealing in securities) and Type 4 (advising in securities) regulated activities pursuant to the Securities and Futures Ordinance (Cap. 571). The contents of this material has not been reviewed or approved by the Securities and Futures Commission. Any and all information provided on this material is for reference only and does not constitute an offer, a solicitation of an offer or any advice or recommendation to buy or sell any financial products. The prices of structured products such as Warrants and/or CBBCs may fluctuate greatly and past performance is not indicative of future performance. The value of structured products may become zero on or before the expiry date and investors may sustain a total loss of investment. CBBCs have a mandatory call feature and are subject to early termination, upon which (i) investors in category N CBBCs will lose all their investments in CBBCs; and (ii) the residual value of category R CCBCs may be zero. Structured products issued by HTI or its affiliate are uncollateralised and investors are relying on the issuer’s credit worthiness in determining the issuer’s ability to meet its obligations under the structured products. If the Issuer is insolvent or defaults in payment, investors may not recover part or all of the amount due. An investor should read carefully the relevant listing documents (and any documents appendix thereto) and the relevant supplemental listing document to understand the full details of the warrant and/or CBBC (including risk factors), and due consideration have been given having considered the nature and risks involved in investing in these products, to decide whether the investment is suitable for an investor’s individual circumstances and, if necessary, an investor should consult their professional advisers. HTI is also the liquidity provider for the warrants and/or CBBCs (“Structured Products”) referred to in the material . HTI may be the only person quoting prices (or market making) for the Structured Products on the exchange. As such, the secondary market for the Structured Products may be limited. HTI (together with its subsidiaries and affiliates, “HTI Group”) provides the information in good faith and has used its best endeavours to ensure that the information provided is accurate and complete. HTI Group however does not represent or warrant the completeness or accuracy of the information and HTI Group. Haitong International Securities Company Limited may make a market in the securities and/ or the derivatives on these securities herein covered. Haitong International Securities Company Limited and/or its group company(ies) may have presently, or have had within the last 12 months, an investment banking relationship with the underlying entity of the securities herein covered. Haitong International Securities Company Limited is a member of Haitong International Securities Group which in turn belongs to group of companies of Haitong Securities Co., Ltd. HTISG and our affiliates, officers, directors, and employees, excluding the analysts responsible for the content of this document, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this document. Haitong International Securities Company Limited and/or its group company(ies) and its affiliates, officers, directors, and employees, excluding the analysts responsible for the content of this document, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this document.

Inline warrant is newly introduced to the market and there is no similar products currently listed on the Exchange for comparison