Warrant features

Warrants derive their value from an underlying instrument, which might be:

• a share in a company listed on ASX or another exchange
• an exchange traded fund
• a share price index
• a commodity
• a currency, or
• a portfolio or basket of securities.

Warrants can be either:

• Call warrants: give you the right to buy the underlying instrument at a set price on or before a set date.
• Put warrants: give you the right to sell the underlying instrument at a set price on or before a set date.

Holders of call warrants can benefit from an upward price movement in the underlying instrument, while holders of put warrants can benefit from a downward trend.

This is price you will pay for the underlying instrument if you exercise a call warrant, or the price you will receive if you exercise a put warrant.

If a warrant is cash-settled, you pay or receive the difference between the exercise price and the value of the underlying instrument at expiry.

While many warrants have an exercise price fixed when they are issued, others have a variable exercise price (for example, self-funding instalments and MINIs).

Warrants can be either:

• American style: you can exercise the warrant at any time on or before the expiry date.
• European style: you can only exercise the warrant on the expiry date.

The last date on which the warrant can be exercised, and the day when trading in the warrant ends. Some warrants are open ended, with no fixed expiry date. 

Warrants can be either:

• Deliverable: settled by a transfer of the underlying instrument – for example, when you exercise an equity call warrant, shares are delivered to you.
• Cash settled: settled with a cash payment from the warrant issuer to you – for example, when you exercise an index warrant, cash may be paid to you.

Some deliverable warrants may also provide for cash settlement in certain circumstances.

The number of warrants you need to exercise to buy or sell one underlying instrument. For example, if you want to exercise a BHP call warrant with a conversion ratio of 4, you’ll need four warrants to buy one BHP share.

For index warrants, the dollar amount that will be paid to you for each point that the index has moved in your favour when the warrant is exercise or expires. For example, if you exercise an S&P/ASX 200 call warrant with an index multiplier of $0.01 when the index is 200 points above the exercise level, then you will receive $2 per warrant ($0.01 x 200).