Thursday, February 23, 2012

How to Calculate Gearing, Premium & Cash Settlement for Call Warrants?

Call Warrant is an alternative investment that investor can invest in Bursa Malaysia. It can be traded through remisiers, banks’ dealers or via online trading, which is similar to trading shares.

The advantage of call warrants is that, it has unlimited upside (gain) similar to buying the underlying asset, but the loss is limited to the amount initially invested in the call warrant.

In order to make trading decision, normally investors look at gearing, premium, cash settlement & expiry date.

Below is the formula to how calculate call warrant gearing, premium and cash settlement:-

Gearing = Underlying Price/(Warrant Price x Exercise Ratio)

Premium = {[(Warrant price x Exercise Ratio) + Exercise Price] – Underlying Price)}/Underlying Price

Cash Settlement = No of Call Warrants x (1/ Exercise Ratio) x (Closing Price – Exercise Price)

1 comment:

  1. Call Warrant is an alternative investment that investor can invest in Bursa Malaysia.structured settlement

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