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Covered Warrants I

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7. Advantages & disadvantages - a summary

The table below summarises the advantages and disadvantages of covered warrants.

AdvantagesDisadvantages
Gearing and LeverageComplexity
Unlimited gains, limited lossesAdverse price movements
Ease of accessibility and transparencyPremium
Good liquidityLimited life
Transaction costs are lowTime value decay
Designed as a retail productAbsence of price anomalies
Opportunities in bull and bear marketsNo income
Range better than ever beforeScope still limited
Aid to diversificationNo benefit to companies
Ability to invest in assets otherwise unavailableNo shareholders’ rights
Rational price movementNeed to have internet access
Listing on London Stock ExchangeCapital gains tax
Provision of information and educationCredit risk

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