Relationship between the warrant price and the price of the underlying security

US Tech 100

17,168.35

Get Started

If your page isn't loading correctly please Click here

Basic ADVFN Video Help

ADVFN Home

Help

Covered Warrants

Covered Warrants by Alpesh Patel

Relationship between the warrant price and the price of the underlying security

The most important thing to remember is that the price of a call warrant tends to rise as the underlying security price rises and the price of a call tends to fall as the underlying security price falls. The price of a put tends to rise as the underlying security price falls and the price of a put tends to fall as the underlying security price rises.

So why buy a warrant and not the security? Because a warrant is leveraged. That means that for a given percentage change in the underlying price the option price can change by a greater percentage. You get a bigger bang for your buck.

figure 6