MINI Trading Warrants

Warrants are a type of derivative that are issued by banks and other institutions and traded on the ASX. MINIs are a type of trading-style warrant that provide investors with leveraged exposure to ASX 200 shares, indices, currencies and commodities. Trading warrants are a higher risk style of warrant than investment-style warrants. However, if they suit your risk profile and circumstances, they can provide an opportunity for profit.

Source: ASX Understanding Trading and Investment Warrants

Source: ASX Understanding Trading and Investment Warrants

 

Investors have to ability to trade either Long (Call warrants) or Short (Put warrants) to take advantage of rising or falling markets.

These warrants are traded on the ASX and give the holder the same benefit of price movement - as if they were holding the underlying shares directly. The market price of the MINI tracks the price movement in line with the underlying asset price.

Warrant trading offers investors the potential for bigger leveraged returns as the cost of the MINI warrants are a lot less than the underlying shares, giving investors the ability to either gain exposure to the underlying shares for a smaller capital outlay or get exposure to a larger position.

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A MINI warrant differs from other warrants as it is purely a trading warrant that doesn’t give the holder the right to buy or sell the underlying asset or receive any dividends that the underlying shares may pay. The pricing of the MINI is unaffected by the dividends and does not fluctuate on ex-dividend dates and the Strike Price as well as the Stop Loss price will decrease by the dividend amount.

If a position is bought and sold on the same trading day no funding costs are incurred. Where a MINI is held to the next trading day investors are charged a funding cost by the Market Maker which covers the cost of holding the position overnight. This funding cost is added to the Strike Price before trading opens the following morning, as such the Strike Price will change each day.

One of the main features of a MINI warrant is the inbuilt Stop Loss. This will ensure that the maximum amount an investor can lose is no more than their initial investment amount. The Stop Loss is set at a certain distance above or below the Strike Price depending on whether it is a Long or a Short. If a Stop Loss is triggered the Market Maker will halt trading in the MINI and determine the remaining value in the warrant so holders can close out their position. A MINI warrant has no set expiry date, however the MINI will only expire if a Stop Loss is triggered.

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Warrants are a technical product and as such, specialist knowledge is required. For more information, or if you would like to learn about MINI warrants, please contact Toby Jefferis on (08) 9263 5217 or email tjefferis@djcarmichael.com.au.

Toby Jefferis
Senior Investment Adviser
Tel:
(08) 9263 5217
Email: 
tjefferis@djcarmichael.com.au


This information is general advice only, which has been prepared without taking account of your objectives, financial situation or needs; and because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs.