Risks to Consider before Trading Structured Warrants

Date: August 14, 2017

• Limited lifespan – Unlike the underlying asset, warrants have a limited lifespan and will expire. If they expire at-the-money or out-of-the-money, investors holding onto these warrants will lose their entire investment capital used to purchase the warrants.
• Leverage – Being geared instruments, returns can be magnified if the underlying asset moves in the direction favourable to the warrant-holder’s view. However, losses can also be high if the underlying moves against the warrant-holder’s view.
• Issuer risk – Warrant holders are unsecured creditors of issuers. They have no preferential claim to any assets that an issuer may hold in the event the issuers are unable to fulfill their obligation.
• Currency risk – If the price of the underlying asset is denominated in a foreign currency, investors will be exposed to foreign exchange rate fluctuations.
• Market risk – The market value of a warrant is susceptible to other prevailing market forces including the demand and supply of the warrants.
• Suspension from Trading – Trading of warrants will be halted or suspended if the underlying stock is halted or suspended. Warrants investors will not be able to unwind their positions in such circumstances.
Please visit www.sgx.com/warrants for more information on SGX-listed structured warrants or download the Investor Guide to Structured Warrants.

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