This is an important section in any warrants course – indeed any course on any derivative instrument. Derivatives derive their value from a right linked to an underlying financial parameter or security, and unless you know specifically what that right is, you cannot hope to value the derivative.
That sounds so obvious, so simple, yet gullible investors regularly sail into completely unchartered waters without so much as a cursory glance at the warrant terms. Doing your homework is crucial.
It is also important to note that covered warrant terms are not highly standardised.
The basic information for any warrant is to be found in the term sheet which is published at the time of issue, or you can generally obtain this material from a list on the issuer’s web site.
The key information you need will generally fall into ten elements:
You need these vital facts to value and assess warrants correctly: investing blindly without knowledge of these key parameters is unwise to say the least. Researching warrant terms is the minimum ‘due diligence’ work which needs to be undertaken before you invest.
This is the information you need to move on to elementary warrant analysis…
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