Good day Sifu,

May i check with senior here how call-warrant work ?

My question :
1. After maturity date, the call-warrant will not able to convert to mother share?
2. Does it means after maturity the call-warrant will value as zero ? would the RHB bank pay us back at any base price?
3. current price is 0.115, and conversion ratio is 4.5, means 0.115 * 4.5 = 0.512, and sum up with exercise price = RM2.5, means this call-warrant exercising the price of RM3.01 ? since current mother share price is RM2.2, from this huge gap does it means buying mother share is more worth ?

Taking example of DRBHCOMC63 and below are the details :

current price : 0.115

Security Code: 161963
Security Name: DRBHCOMC63: CW DRB-HICOM BHD (RHB)
Type: CALL WARRANTS
Sector: Industrial Products
Listing Date: 06 Aug 2018
Maturity Date: 26 Mar 2019
Issue Price: MYR0.1500
Number of Shares: 40,000,000
Exercise Level: MYR 2.5000
Conversion Ratio: 4.5:1
Underlying Stock:
DRBHCOM
Price Premium (%): 36.54
Gearing Ratio: 4.27

Thanks for guidance !

This post has been edited by officeBoy: Sep 4 2018, 10:41 PM

1. 99% of the call warrant out there is not convertible to mothershare, but using cash settlement when matured, aka the issuing party will pay you money in cash for the differentiate value between the conversion price vs mothershare price.

2. Not necessary, it depends on its conversion price/exercise price. Mothershare price > exercise price, the warrant has its value.

3. Yes, if the mothershare doesn't rise above Rm2.5, the warrant worth nothing when matured. It is more "worth" on paper to buy the mothershare directly.

But for speculator pov, why the warrant is not trading at 0.005, since it worth nothing currently?

Eg. with buying mothershare now at Rm2.2, then if on 2019, it rises to Rm3.5, you earn Rm1.3
1.3/2.2 = 59% gain

With buying CW at RM0.115, the CW worth at Rm3.5 = (3.5-2.5)/4.5 = RM0.22
You gain 0.105
0.105/0.115 = 91% gain, aka gearing effect.

Another point is, you need lesser capital with CW compared to mothershare but at the expense of paying the premium price.

CW biggest enemy is always time, aka its worth shrink when approaching near and nearer to maturity.

This is structured warrants issued investment bank and not ordinary warrant issued by the company. you can't own the underlying shares of the company by converting it into mother shares on the rest.

Cherroy has answered your queries.

take a read at the link below.
https://www.malaysiawarrants.com.my/home

also on his last point, structured warrants' value shrink rapidly when maturity draws near.

advise is, don't touch if you dont know what you are doing.

you might end up losing 100% of your capital.

Another way to look at it ...
If somehow you know for sure that the share price going to double up in 2 or 3 days than you can close your eyes and buy whatever warrant call or normal except the H-warrant (that work the reverse) for you to get the maximum gearing
If not dont touch the warrants without understanding it.

Many thanks cherroy, tehoice and rosdi1 for your reply, it really help me for better understanding !

May i ask for your experience, how close the duration for the CW price to sink before maturity date? people will start dump CW in 1 month before the maturity ?

Hi Cherroy,
taking for this example, what will happen if i do not sell the CW at RM0.22 and it mature in next day? the issuing party will pay cash to us ?

works like a casino, only the house always win.

Yes, they will pay by cash to you.

Please be reminded, as CWs holder, you are not entitled for company dividend (if the company declared dividend), and CWs generally has relative short life across. (less than 1 year)

Thanks again for clarification, Cherroy !

another point to add, only if the warrant still has value at expiry, but typically the intrinsic value is zero and you don't get anything back.

The reason why many CWs holder lose out, is they are paying a premium at the start.

Many CWs are issued at high premium range from 10~30%, and it is not easy for a stock to rise up such a magnitude in short period of time before maturity.

yeah, like lowya said, it's always the banker that wins.

no structured warrants are issued at discount.

For this moment, those holding TOPGLOV-C57 will get cash from Maybank IB on 30/Jun/2020 ?

Current TOPGLOV is at RM14.xx

This post has been edited by ronnie: Jun 26 2020, 03:42 PM

I see srike price is RM6. So yes, you will get some cash back. But it won't be on the 30th June itself. I don't know the processing time for sure, but I think about 2 weeks, but you can check with the IB SW desk.

A word of advice, don't buy call warrants and hold to maturity. That's a good way to lose money.

Anyone mind to explain how the gearing ratio work based on the TS post? I have no idea about the gearing effect things.

How do you make money with Structured Warrants if you do not wait until Expiry ?
Is it via buy and sell the Structured Warrants in the stock exchange ?

Trade.

I only hold max a few days. Often just intraday.

But currently intraday is temporary suspended correct?

Where got..

The suspended one is intraday short sell..