ASX Warrants

Submitted by Marco on 2 January, 2006 - 13:02

Warrants listed on the ASX are a leveraged financial product that is traded on the markets

A warrant is a financial instrument issued by banks and other institutions and traded on ASX. Warrants provide investors an alternative way to gain exposure to a variety of underlying assets, such as shares, to achieve a desired result.

There are different types of warrants which can suit investment and/or trading purposes. Warrants with an investment purpose, such as instalments, are generally longer-dated, tend to be less frequently traded and have a lower risk/return profile. While warrants with a trading purpose, such as trading warrants are shorter-dated, traded frequently and have a higher risk/return profile.

The main reasons why you would invest in warrants are:

  • Achieve a leveraged exposure to an underlying share, such as BHP Billiton
  • Diversify your exposure to the sharemarket
  • Generate an income stream through dividends and franking credits
  • Protect the value of your share portfolio

Each warrant has a set of features that defines its characteristics. These features are non standardised, varying between warrant types, and are tailored to meet the needs of different types of investors. Some of the features offered by warrants are:

  • entitlement to the full dividends and franking credits paid on the underlying share
  • ability to pay a portion of a share's value upfront without the obligation to repay the balance
  • capital guarantees over the issue price of the warrant.
    • Some warrant types, such as instalments are particularly popular within a Self Managed Super Fund environment.

      For each warrant a set of terms and conditions are outlined in a disclosure document. You can obtain a copy of a disclosure document from your adviser, the warrant issuer (or their web site) or from the ASX web site when you obtain a warrant price.