Warrants

What is a warrant?

A warrant is a financial instrument that gives the holder the right, but not the obligation, to buy (Warrant Call) or sell (Warrant Put) a given quantity of an 'underlying' financial asset, at a price and for a period that are fixed in advance by the financial institution that establishes the liquidity. The evolution of a warrant is linked to that of its underlying asset and therefore has leverage, either upwards or downwards. Unlike shares that never expire, warrants may only be exercised during a specific period of time and lose their value after their expiration date.

Advantages

• Leverage enables you to increase or decrease your investment
• Warrants can be used as a hedging instrument

Disadvantages

• Very high risk: you can lose up to 100% of the amount invested
• This type of instrument is only appropriate for knowledgeable investors