Assume that the underlying stock price in 20 13 years is 10 yuan, the exercise price of the underlying stock warrant is 12 yuan, and the warrant market price (assuming the warrant conversion ratio is 1: 1) is 0.5 yuan.
If investors buy warrants, it is equivalent to investing in the underlying stock of 12 yuan at the cost of 0.5 yuan. If the underlying stock rises to 15 yuan in the future, its yield (excluding transaction costs) is:
Investment warrant yield = (15-12-0.5)/0.5 = 500%.
If the investor directly invests in the underlying stock, its return rate = (15-10)/10 = 50%.
Because warrants have leverage effect, if investors correctly judge the market trend of the underlying assets, the return on investment of warrants will often be much higher than that of the underlying assets. On the contrary, the warrant investment will be wiped out.
Of course, if investors buy the same amount of underlying assets instead of warrants and hold the rest in cash, the risk will be less, because the biggest loss for investors is not too high royalties.
Extended data
Leveraged foreign exchange trading seems to be a high-risk financial leveraged trading tool. Because the participants in margin trading only pay a small percentage of the margin, the normal fluctuation of foreign exchange prices is magnified several times or even dozens of times, and the gains and losses brought by this high risk are amazing.
On the other hand, the daily turnover of the international foreign exchange market can reach more than 1 trillion dollars, and many international financial institutions and funds participate in it. The economic policies of various countries change at any time, and all kinds of unexpected events occur from time to time, which may be the reasons for the large fluctuations of exchange rates. Large organizations employ a large number of human resources, obtain first-hand information from various channels, and the investment team uses the analysis results to make profits in real time.
Although the amount of margin for leveraged foreign exchange trading is small, the actual funds used are huge, and the foreign exchange price fluctuates greatly every day. If investors misjudge the trend of foreign exchange, they will easily be wiped out.
In case of unexpected market conditions, if measures are not taken in time, not only the principal will be completely lost, but also the price difference may be added. Investors must not take it lightly. When determining the leverage ratio, we must understand the risks.
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