Guaranteed Stop Loss MINIs

Guaranteed Stop Loss or GSL MINIs are open ended leveraged trading products that seek to track an underlying asset. GSL MINIs are a variation of the traditional MINI structure and have a number of key differences to traditional MINIs. Some of these differences include:

  • The stop loss level or trigger is always at the strike or exercise price of the MINI
  • An additional amount is paid for the Stop Loss Level
  • Potentially higher leverage
  • Does not always move on a 1 for 1 basis with the underlying asset

To differentiate between traditional MINIs and GSL MINIs investors need to be aware of the fourth letter of the warrant code. For traditional MINIs the fourth letter is a K and for Guaranteed Stop Loss MINIs the fourth letter is always an L.

Currently CitiWarrants are the only issuer of GSL MINIs and their issuer code or fifth letter is an O.

Underlying assets Issued over Shares
Term to expiry Open-ended no expiry date
Exercise style American
Exercise price Amended daily
Code abbreviation 6 letter code with the fourth letter being L
Initial payment Share price - Exercise Price + gap risk premium (GSL MINI long)
Funding costs Charged on a daily basis
Settlement Cash settled
Other features Limited recourse loan and stop loss level set at the strike price

Pricing

GSL MINI long = Share price - Exercise price + gap premium

GSL MINI shore = Exercise price - Share price + gap premium

Gap Premium

The Gap Premium is a cost paid by holders of MINI longs and shorts. It reflects the cost of the gap risk that the issuer takes on by having the stop loss level set at the strike or exercise price of the MINI. This is different to traditional MINIs where the stop loss level is set above the strike price for MINI longs and below the strike price for MINI shorts. This gap risk premium may change from day to day and is determined by the issuer based on the volatility of the underlying share, future dividend assumptions and interest rates.

Example:

BHP GSL MINI long:

Warrant code BHPLOB
Underlying asset BHP Billiton Ltd
Exercise price $33.00
Warrant Price $2.85
Warrant type GSL MINI Long
Expiry date 31 December 2029
Conversion ratio 1

BHP is trading at $35.25

Value of BHPLOB MINI Long  = Share price - Exercise price + gap premium

                                                  = $35.25 - $33.00 +0.60

                                                   = $2.85

For more information on Guaranteed Stop Loss MINIs please review the issuers' PDS.