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Covered Warrants I

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27. Conclusion

The covered warrants market in the UK looks set to get off to a solid start, with plenty of prospects for expansion thereafter. After all, London has a lot of catching up to do. And there are plenty of successful market models to follow, which London could emulate with a fair wind from global stockmarkets.

Although it might not seem this way to novices, the UK market is starting by keeping things simple. The issuers and the LSE decided that more complex warrants would confuse, mislead, and eventually stifle demand as inexperienced warrant investors grappled with unfamiliar jargon and information. Most warrants will therefore be plain vanilla to begin with. More exotic and cleverly structured 'investment' style warrants can follow later once a base of education has been achieved.

Whatever support may be provided though, the success of the new market ultimately rests on the provision of warrants which investors wish to trade, and are able to trade profitably. It is reasonable to be optimistic about this prospect, but not complacent. Covered warrants are effectively a brand new product in the UK. There are a few problems which could arise.

For now though the immediate prospects are tantalising. The UK looks set to have more warrants than ever before, more choice and variety, more liquidity, more instruction, more backers, and a fresh set of regulations written specifically for the protection of private investors.

The ingredients are in place: let us hope it is a recipe for success.

1. Introduction 2. What are covered warrants? 3. Comparison between corporate warrants and covered warrants 4. Advantages of warrants 5. Advantages of warrants – the magic of gearing 6. Disadvantages of warrants 7. Advantages & disadvantages - a summary 8. International warrants markets 9. UK warrant market 10. Types of covered warrant I (warrant terms) 11. Types of covered warrant II (underlying assets) 12. Types of covered warrant III (exotics) 13. Information on warrant terms 14. Warrant trading 15. Warrant pricing 16. Basic analysis I (underlying asset) 17. Basic analysis II (prices and terms) 18. Basic analysis III (gearing) 19. Basic analysis IV (intrinsic value) 20. Basic analysis V (premium) 21. Advanced analysis I (Black-Scholes Model) 22. Advanced analysis II (volatility) 23. Advanced analysis III (the greeks) 24. Risk 25. Trading strategies 26. Tax 27. Conclusion

Recommend Reading

• Andrew McHattie on Covered Warrants

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