Warrants

Warrants are financial products issued over underlying securities (such as shares or exchange traded funds) that trade on the ASX. Some warrants give the holder the right to buy or sell an underlying instrument (for example, a share) for the price set in the terms of issue. Others entitle the holder to receive a cash payment that relates to the value of the underlying instrument at a particular time (for example, index warrants).
Warrants are available in a variety of structures that have different terms, risk profiles, underlying assets, maturity dates and exercise prices. Some warrants may also be used to provide gearing within a self-managed superannuation fund (SMSF), allowing the SMSF to gain exposure to a larger parcel of shares than it could obtain by investing directly.
Warrants can usually be split into the following two categories.
These are suitable for investors seeking medium- to long-term exposure and can offer additional benefits such as protection of the value of the underlying asset. Examples of investment warrants include instalment warrants and endowments. Westpac issues Instalment Warrants including Westpac Vanilla Instalment Equity Warrants (Westpac VIEWS) and Westpac Self-Funding Instalments (Westpac SFIs).
Trading warrants tend have a higher risk than investment warrants and are more suited to investors who are willing to take higher risks in return for the prospect of better returns. Examples of trading warrants include call and put warrants, knock-out warrants and MINIs.
You should only trade warrants if you are confident that you understand the risks involved and have adequate financial resources. Some of the key risks include:
Each warrant is different. This information only covers some general features and is not a summary. Read the issuer’s product disclosure statement, or equivalent disclosure document, before making a decision.
Read the Understanding Warrants booklet issued by the ASX (851KB PDF), and the Investing in Warrants (1,857KB PDF) booklet issued by Cboe for more details.
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