INSTRUCTION OF COVERED WARRANT (CW) TRADING
25-08-2021
1. What is Covered Warrant (CW)?
2. Basic information
Underlying securities | : | Underlying securities can be stocks, market indices or ETF certificates. At the first stage of CW’s implementation in Vietnam, only stocks are chosen to be underlying securities. | |
Conversion ratio | : | Conversion ratio shows the number of CWs that investors need in exchange for a unit of underlying security.
For example, if the conversion rate is 10:1, investor needs to own 10 CWs to buy 01 underlying security. |
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Maturity period of CWs | : | The minimum maturity period of CWs is 3 months and maximum is 24 months. | |
Expiry date | : | The last day that CWs can be traded (2 days before the maturity date). In case CWs are unlisted as the underlying securities are unlisted, the expiry date is the last trading date of underlying securities. | |
Maturity date | : | The last day that CW holders can exercise CW. | |
Exercise style | : | At the first stage of CW’s implementation in Vietnam, exercise style can only be European style. According to this style, CW holders can only exercise CW on the maturity date. | |
CW price | : | The amount of money investors spend to buy CW. | |
Exercise price | : | Price at which investors execute the call or put option of underlying securities when the CW expires | |
Payment price | : | The average price of underlying securities in 5 previous consecutive trading days before maturity date. | |
Payment methods | : | Cash payment is the difference between the exercise price and the underlying securities price. |
3. How to purchase CW?
Japan Securities Co., Ltd is not issuing CWs, hence, our company do not provide CWs purchasing service in primary market.
Japan Securities Co., Ltd’s Clients can perform CWs transactions on secondary market like normal securities transactions on Ho Chi Minh Stock Exchange.
4. CWs trading methods
Ceiling/Floor price of CW = Reference price of CW +/- (Underlying security x Price fluctuation range) / Conversion ratio
5. Right execution
Amount of cash = (Number of Owned CWs/ Conversion ratio) x (Payment price – Exercise price)
In which: