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Warrants Basics > Handbook

What is a structured warrant?  
Why invest in structured warrants?
How to read a warrant name?
Settlement Calculations
Five major factors that influence the price of a warrant
Glossary




Settlement Calculation 1 - Index Call Warrant

Index Call Warrant = (Settlement Level - Strike Price)
          Conversion Ratio

e.g. STI 2300SGAeCW060330

Key terms:
Underlying Strait Times Index
Warrant Type
 Call
Issuer
 SG
Strike Price 2,300
Maturity Date 30 Mar, 06
Conversion Ratio 200

The settlement level of this warrant will be the final settlement price of the Straits Times Index March 2006 Futures Contract on 30 Mar, 06. If the settlement level of Strait Time Index is 2,500, then the settlement calculation of STI 2300SGAeCW060330 will be:

   (2,500 - 2,300)
            200
 
  = SGD1.00 per warrant

 

Settlement Calculation 2 - Index Put Warrant

Index Put Warrant = (Strike Price - Settlement Level)
            Conversion Ratio

e.g. STI 2200SGAePW060330

Key terms:
Underlying Strait Times Index
Warrant Type
 Put
Issuer
 SG
Strike Price 2,200
Maturity Date 30 Mar, 06
Conversion Ratio 200

The settlement level of this warrant will be the final settlement price of the Straits Times Index March 2006 Futures Contract on 30 Mar, 06. If the settlement level of Strait Time Index is 1,900, then the settlement calculation of STI 2200SGAePW060330 will be:

  (2,200 - 1,900)
          200

  =SGD1.50 per warrant



Settlement Calculation 3 - Stock Call Warrant

Stock Call Warrant = (Settlement Level - Strike Price)
          Conversion Ratio

e.g. CapitaLandSGAeCW060821

Key terms:
Underlying
 CapitaLand
Warrant Type
 Call
Issuer
 SG
Strike Price
 3.3
Maturity Date
 21 Aug, 06
Conversion Ratio
 1

Settlement level of a stock warrant will be the arithmetic mean of the closing prices of an underlying stock (in this case: CapitaLand) for each of the five trading days immediately preceding the maturity date (21 Aug, 06).


Arithmetic mean of the closing prices of CapitalLand for these 5 trading days
will become the settlement level of CapitaLandSGAeCW060821


Settlement Calculation 4 - Settlement Level of a Stock Call Warrant

Assuming the closing prices of CapitaLand from 14 - 18 Aug, 06 are:

Date Closing Prices (SGD)
14 Aug, 06
 3.34
15 Aug, 06
 3.44
16 Aug, 06 3.5
17 Aug, 06 3.55
18 Aug, 06 3.56

The settlement level of CapitaLandSGAeCW060821 will be:

 
= SGD (3.34+3.44+3.5+3.55+3.56)
                          5

= SGD3.478

(Settlement Level - Strike Price)
          Conversion Ratio
= SGD (3.478 - 3.3)
                  1

= SGD0.178 per warrant


Settlement Calculation 5 - Stock Put Warrant

Stock Put Warrant = (Strike Price - Settlement Level)
          Conversion Ratio

e.g. ABC put warrant

Key terms:
Underlying ABC
Warrant Type
 Put
Strike Price 2.5
Maturity Date 19 Jun, 06
Conversion Ratio 1

Settlement level of a stock warrant will be the arithmetic mean of the closing prices of an underlying stock (in this case: ABC) for each of the five trading days immediately preceding the maturity date (19 Jun, 06).


Arithmetic mean of the closing prices of ABC for these 5 trading days
will become the settlement level of this warrant.

Settlement Calculation 6 - Settlement Level of a Stock Put Warrant

Assume the closing prices of ABC from 12 - 16 Jun, 06 are:

Date Closing Prices (SGD)
12 Jun, 06
 2.3
13 Jun, 06
 2.25
14 Jun, 06 2.2
15 Jun, 06 2.1
16 Jun, 06 2.1

The settlement level of that ABC put warrant will be:

 
= SGD (2.3 + 2.25 + 2.2 + 2.1 + 2.1)
                           5

=SGD2.19

(Strike Price - Settlement Level)
            Conversion Ratio

= SGD (2.5 - 2.19)
                1

= SGD0.31 per warrant