How to buy and sell warrants
Warrants, the classic leverage products, are usually issued by banks. For example, you can find a wealth of warrants on various underlying assets at Vontobel*, Societe Generale* or HSBC. The financial institutions that issue warrants issue them as bearer bonds. When they are issued by a financial institution, warrants are given a securities identification number (WKN) or an International Securities Identification Number (ISIN) in order to be able to uniquely identify the warrant.
Originally, warrants were also issued by companies to secure their funding. At that time, warrants were often linked to bonds. In this case, the issuer assured the buyer the right to purchase company shares at a predetermined price. It was only in the 1990s that it became customary to also issue on other underlying assets and not to link them to (corporate) bonds.
As an investor, you can buy warrants either from the issuing house or via the traditional stock exchanges.
In addition to a securities account with a broker or a bank, investors also need a kind of “permission” to trade warrants: they must first acquire the ability to deal in financial futures.
Our recommendation: Warrants are considered speculative asset classes. Therefore, before making an investment, familiarize yourself with the risk information.
As a rule, the broker will issue financial futures trading abilities without any problems if you have proven that you already have experience in trading with speculative investments such as warrants, or that you are aware of the relevant forms or instructions for trading with warrants.
You can find suitable warrants in various ways. If you already know which underlying value your warrant should be based on, it is also worthwhile specifically with issuers such as Vontobel*, Societe Generale* or HSBC to search for suitable products.
Once you have acquired the ability to conduct financial futures transactions and selected a suitable product, the securities identification number (WKN) or ISIN will help you to identify the warrant without a doubt. You can then purchase the warrant over the counter directly from the issuer issuing the product. To do this, he asks his broker the price for the warrant and then has the option of buying it or canceling the purchase. In direct trading, warrants can also be purchased outside of regular stock exchange opening hours. In this way, investors who buy warrants in over-the-counter trading can benefit from current developments on the US stock exchanges.
In addition to direct trading, warrants can also be purchased in regular stock exchange trading. To buy a warrant, warrant buyers use the stock exchanges. The advantage is that buyers can set limited purchase prices or hedges to limit losses when buying on the stock exchange. In exchange trading – unlike in direct trading – however, an additional brokerage fee is charged for the stock exchange operator. However, the stock exchange operators also offer trading monitoring when buying warrants, which makes trading with warrants more secure than buying warrants in direct trading.