Andrew McHattie on Covered Warrants: New Opportunities in an Exciting New Market
By: Andrew McHattie (author)Paperback
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The traditional company warrants market is set to be eclipsed by a new market which should offer huge opportunities for active investors. Revised regulations have paved the way for a new 'covered warrants' market in London. The number of warrants available for trading by private investors on the London Stock Exchange (LSE) will multiply many times over. Warrants will become available on a broad range of blue-chip companies, sector baskets, and on both UK and overseas indices. Investors will be able to buy both calls and puts. The vast majority of the new warrants will be exercisable for cash which will mean they can be traded free of stamp duty. This book is intended as a primer for investors new to covered warrants, although more experienced investors may also find some value in the timely information about the formation of the new market in London. Readers used to dealing in traditional listed warrants in the UK will find the new covered warrants quite different. Jargon is unavoidable, but it is explained in the text and in the glossary at the back.
Andrew McHattie (MA Cantab) runs the investment publishing company, The McHattie Group and is chairman of McHattie Investment Management Ltd. He has been the publisher and editor of the Warrants Alert newsletter since 1989, and edits a range of other warrant publications and services including Warrants Alert Professional, The Warrants Directory, and Warrants Magazine.
Introduction For novices and more experienced investors alike Preview of chapters Focus on UK but with lessons from elsewhere 1. What is a Covered Warrant? Definition and basic attributes Comparison between corporate warrants and covered warrants 2. Overseas Markets Germany Italy Euronext Switzerland Spain Scandinavia Australia Hong Kong Singapore Japan South Africa Canada Why not the US? Lessons 3. History & Development (i) - Out With the Old From boom to bust in a decade Limited issuance and liquidity Lack of rights for warrant holders Dead, or only resting? 4. History & Development (ii) - In With the New Regulatory Development The listing rules The conduct of business rules Issuers Method of issue Time and trading 5. Types & Terms of Covered Warrants Calls and Puts European and American Warrants per share Stock Warrants Changes to the terms Basket warrants Index warrants Bond warrants Commodity warrants Currency warrants Exotics Barrier warrants Corridor warrants Trigger warrants 6. Pricing and Trading Warrant Information Pricing Market-making Price influences Bid-only and offer-only warrants Cash settlement Stockbroking 7. Advantages and Disadvantages Gearing Unlimited gains, limited losses Ease of accessibility and transparency Good liquidity Low transaction costs Designed as a retail product Opportunities in bull and bear markets Range better than ever before Aid to diversification Ability to invest in assets otherwise unavailable Rational price movement Stock Exchange listing Provision of information and education Complexity Adverse price movements Premium Limited life Time value decay Absence of price anomalies No income Scope still limited No benefit to, or direct link with, companies No shareholders' rights Need to have internet access Capital gains tax Credit risk 8. Analysis of Covered Warrants (i) - Getting started Fundamental analysis Chart analysis Homework - prices and terms Gearing Intrinsic Value Premium Break-even point Capital fulcrum point 9. Analysis of Covered Warrants (ii) - Advanced Black-Scholes Volatility The Greeks Leverage Concluding remarks 10. Risk Risk warning A salutary example Takeover risk Credit risk Currency risk Managing risk Measuring risk Value at risk Taking responsibility Advice 11. Strategies Speculation Hedging Delta neutral hedging Cash extraction Long-shot investing Straddles and strangles 12. The Future A look ahead to how the market might develop Sources of Further Information Web addresses Glossary Bibliography Index
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- ID: 9781897597200
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