HSI structured warrants most actively traded on SGX

SO far this column has featured mainly company-issued warrants but there is another kind which is also popular, albeit mainly among professional traders. These are known as structured (or covered) warrants, instruments that are issued on various underlying assets by approved issuers such as Macquarie Bank and Vontobel Financial Products.

The most actively traded structured warrants in the local market are those written on the Hang Seng Index, though occasionally, there is a spike in interest in warrants on individual stocks such as Singtel and the banks.

Before looking at pricing, traders should note that there are two types of structured warrants - calls which gain value when the underlying asset rises, and puts, which rise when the underlying falls. Calls are, therefore, bought when prices are expected to rise, while puts are suitable in weak markets and are often used to insure portfolios from loss.