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 Warrants Trading for Newbies
Issued on October 15 2010 par Strategies Options
Warrants Trading explained as for kids .
Warrants are bets on an underlying which can be bought to a bank. They provide a way to make profits if
→ the underlying moves beyond a particular level (in that case the bet is called a call) → the underlying moves under a particular level (in that case the bet is called a put) The underlying can be an index, a stock, a bond, ...and is called an underlying. I - The 'call warrant case' - Enjoy the upside! Imagine that one is able to buy a call for $ 5, and that call warrant enables to make profits if a particular stock moves beyond $100. That leads to :  the break even is 100 + 5 = $ 105, level where there is no gains and no losses. The risk It's limited to have been paid, here $ 5. II - 'Put warrant case' - Enjoy the downmove ! Imagine that one is able to buy a put warrant for $ 4, and that put enables to make profits if a particular stock moves under $100. That leads to :  the break even is 100 - 4 = $ 96, level where there is no gains and no losses. The risk It's limited to what has been paid, here $ 4. Warrants are options alike, sold by financial institution which pledge to make a market in order to uneble users to get out anytime. Next : Warrants : A First Attempt Previous : Options Trading For Newbies Other Derivatives - INDEX Other Derivatives - CHAPTER I Other Derivatives - CHAPTER II Other Derivatives - CHAPTER III Other Derivatives - CHAPTER IV Strategies Options |
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