About ASX Warrants
A warrant is a financial instrument issued by banks and other institutions and traded on ASX. Warrants provide investors an alternative way to gain exposure to a variety of underlying assets such as shares. Warrants are very broadly split into investment-style products and trading-style products.
Certain types of warrants such as instalments provide investors with full exposure to the benefits of share ownership.
Benefits of investing in warrants
The benefits of investing in warrants are to:
Achieve leveraged exposure to an underlying instrument, such as BHP Shares
Diversify your exposure to the sharemarket
Generate an income stream through dividends and franking credits
Protect the value of your share portfolio
Key product features
Each warrant has a set of features that defines its characteristics. These features are non-standardised, varying between warrant types, and are tailored to meet the needs of different types of investors. Some of the most common features offered are:
- Underlying instrument
- Expiry date
- Exercise price
- Exercise style (American or European)
- Conversion Ratio
Types of warrants
Investment warrants are suitable for investors seeking to achieve a medium to long term exposure to an underlying asset. They have a number of features that make them attractive to investors such as entitlements to dividend and franking credits, capital protection and potential tax benefits.
The following types of investment warrants are currently quoted on ASX:
Investors use trading warrants to gain significant leveraged exposure to a variety of underlying assets in a rising or falling market. Certain types of trading warrants can also be used to protect the value of an existing portfolio or shareholding. They are issued over a broad range of underlying assets such as equities, indices, currencies and commodities.
The following types of trading warrants are currently quoted on ASX:
If you’re already using a broker to buy and sell shares, they may also advise on warrants. However if your existing broker is not active in warrants, or accredited to advise on warrants, you may need to find a specialist broker in this area. You can use the ASX find a broker tool to help you search.
There are risks associated with investing in warrants. These include:
Performance of the underlying asset
Credit risk of the issuer
Leveraged returns, leveraged losses
Risk of extraordinary events
Please note that different warrant types and warrant series will have different risk profiles. For more information on the risks of trading warrants, please read the ASX explanatory booklet 'Understanding Trading and Investment Warrants' (PDF 879KB).