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Put Warrants Still Not Popular Despite Market Plunge

With the stock market sell down the past one week, the only instrument in the stock market that is likely to produce profit for its holders is put warrant.  There are a number of local underlying put warrants listed on Bursa Malaysia.  Nevertheless, the volume on these put warrants is not encouraging at all.


The “heaviest” traded of the local underlying put warrants, AXIATA-HA, hit a volume of 560,000 on May 24th.  This is the highest daily volume of the four local underlying put warrants from inception.


Why is the trading volume for put warrants so low?


The answer may be that there is no information or even worse, inaccurate information on put warrants listed on Bursa Malaysia.


The issuer for the 4 local underlying put warrants, OSK Investment Bank, did not have the put warrants listed on the structured warrants pricing table in its website.  It only contained information and indicators for call warrants.


What is nightmarish for investors is the incorrect premium calculation of put warrants on the trading website of most stock brokers in Malaysia.  Apparently, the premium formula is that of call warrant.



For example, IOICORP-HA premium is calculated to be 27.66% (see screenshot below).



In the above screenshot, IOICORP-HA has an exercise price of RM5.43 and exercise ratio of 7.76 to 1.  Since, IOICORP-HA share price is RM4.77, the put warrant is in-the-money as holders of IOICORP-HA can sell the share at RM5.43.  With the last trade price of 8.5 sen, the cost of acquiring the option to sell one IOICORP share at RM5.43, is RM0.6596 (8.5 sen * 7.76).  The intrinsic value of IOICORP-HA is 66 sen (or RM5.43 – RM4.77).  This is almost the same as the put warrant price.  Therefore there is no premium on IOICORP-HA.


With issuers not putting any effort to make information more accessible and most trading website showing wrong calculations, how do we expect investors to get interested?  Even though money can be made from put warrants, one must really do a lot of manual calculations before deciding whether to buy or sell.  


Issuers and Bursa Malaysia must look into this matter if they want to seriously develop our structured warrant market.


Alan Voon

Warrants Specialist




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