Date: August 14, 2017
• Leverage – Warrants allow investors to gain exposure to an underlying asset at a fraction of its price. For the same investment outlay, a warrant provides an increased exposure to the underlying asset and this magnify the returns available.
• Limited downside losses – The maximum potential loss is limited o the total amount paid of the warrants, which is a fraction of the underlying asset. Potential gains, however, are unlimited for call warrants.
• Access to diverse markets – Warrants provide investors alternative avenues to participate in local and foreign-listed equities, basket of shares (e.g. ETF) or indices.
• Cash extraction – Investors can free up capital by buying the call warrants instead of the underlying assets and yet maintain an equivalent level of exposure to the underlying assets.
• Portfolio protection – Put warrants can be used to protect against a decline a portfolio’s value. This is known as hedging.
• No margin calls – Unlike other derivatives like Contract for Difference (“CFD”) or Options, warrant investors do not have to make a cash top-up if the underlying assets move adversely.
• Liquidity – All warrants listed on SGX have market makers to provide continuous bid and ask prices. Investors can buy and sell warrants anytime during market hours.
