What are 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, to achieve a desired result.u may need to pay more if you want advice and/or access to research on a company. Find out more about finding a stock broker.
There are different types of warrants which can suit investment and/or trading purposes. Warrants with an investment purpose, such as instalments, are generally longer-dated, tend to be less frequently traded and have a lower risk/return profile. While warrants with a trading purpose, such as trading warrants are shorter-dated, traded frequently and have a higher risk/return profile.
The main reasons why you would invest in warrants are:
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 features offered by warrants are:
- entitlement to the full dividends and franking credits paid on the underlying share
- ability to pay a portion of a share's value upfront without the obligation to repay the balance
- capital guarantees over the issue price of the warrant.
Some warrant types, such as instalments are particularly popular within a Self Managed Super Fund environment.
For each warrant a set of terms and conditions are outlined in a disclosure document. You can obtain a copy of a disclosure document from your adviser, the warrant issuer (or their web site) or from the ASX web site when you obtain a warrant price.
To discover more about warrants, visit the online warrants class.
How to buy and sell warrants
First you need to set up a client account or trading account and have that account activated for warrants before you can start trading warrants. This can take up to a week to finalise but can usually be done in 24 hours.
Once that's done right to call your adviser to get some guidance on what warrant will suit your strategy.
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