STRICTLY CONFIDENTIAL
Introduction to Structured Warrants
Leong Kah Meng, CFA
Head of Warrants Sales, Malaysia
Macquarie Capital Securities (M) Sdn Bhd
STRICTLY CONFIDENTIAL
Disclaimer
Please DO NOT download,
upload, post or otherwise make
available any material from this
webinar to the public without our
prior consent.
This presentation material has
not been reviewed by the
Securities Commission
Malaysia.
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Investment products including warrants are subject to significant investment risks, including the
possible loss of the principal amount invested
Where past performance is referred to, it is not indicative of future performance. Examples quoted in
this presentation are for illustration purposes only and does not represent any investment views or
strategies.
Advice should be sought from a financial adviser regarding the suitability of the investment product
before you commit to invest in it
Important information
PAGE 4
Disclaimer
The information is produced by Macquarie Capital Securities (Malaysia) Sdn. Bhd. (Company No 463469-W) ("MCSM") which is the issuer of the Macquarie warrants in Malaysia
(“Warrants”). The Warrants are guaranteed by Macquarie Financial Holdings Limited. The information is intended for residents of Malaysia only. No part of this presentation may
be copied, either in whole or in part, or distributed to any other person without MCSM’s consent. This presentation material has not been reviewed by the Securities Commission
Malaysia.
Any material provided herein, including any indicative terms are provided for information and educational purposes only and does not constitute an offer, a solicitation of an offer, or
any advice or recommendation to conclude any transaction. While MCSM provides the information in good faith and derived from sources believed to be reliable, MCSM does not
represent or warrant the completeness, reliability, accuracy, timeliness or fitness for any purpose of any of the material and it accepts no responsibility for the accuracy,
completeness or timeliness of the information.
The Warrants constitute general unsecured contractual obligations of the issuer and of no other person and the guarantee constitutes the general unsecured contractual obligations
of the guarantor and of no other person. If you purchase the Warrants, you are relying on the creditworthiness of the issuer and the guarantor and have no recourse/ rights against
the underlying corporation, the underlying exchange traded funds and the manager or trustee, the underlying index sponsor that compiles and publishes the underlying index and
the constituents companies of the index.
You are warned that the price or level of the underlying financial instruments and Warrants may fall in value as rapidly as it may rise and you may sustain a total loss of your
investment. You should therefore make sure you understand the terms and conditions of the Warrants offered, the risk factors involved. Do not invest in them unless you fully
understand and are willing to assume the risks associated with them. In preparing the information contained herein, MCSM did not take into account the investment objectives,
financial situation and particular needs of the reader.
Before making an investment decision on the basis of the information contained herein, you should consult, to the extent necessary, your own independent professional advisers.
You should read the full details of the Warrants, including the risk factors, which are set out in the most recent Base Prospectus and the relevant termsheet. Copies of the
documents may be obtained from www.malaysiawarrants.com.my.
MCSM is the market maker for the Warrants (acting through Macquarie Capital Securities (Singapore) Pte. Limited). The market maker may be the only persons quoting prices for
the Warrants on Bursa Malaysia Securities Berhad. Where past performance is referred to, it is not indicative of future performance.
Other than Macquarie Bank Limited ("MBL"), any Macquarie Group entity noted herein is not an authorised deposit-taking institution for the purposes of the Banking Act 1959
(Commonwealth of Australia). That entity's obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of
the obligations of that entity, unless noted otherwise.
The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Macquarie Capital Securities (Malaysia) Sdn. Bhd
(“Macquarie”). Standard & Poor’s®, S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark
of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by
Macquarie. Macquarie’s warrants are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any
representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
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Structured Warrants in Malaysia
Source: Bloomberg, as at 31 May 2020
RM0
RM500
RM1,000
RM1,500
RM2,000
RM2,500
RM3,000
RM3,500
RM4,000
Jan
-17
Fe
b-1
7
Ma
r-1
7
Ap
r-17
Ma
y-1
7
Jun
-17
Jul-
17
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Jan
-18
Fe
b-1
8
Ma
r-1
8
Ap
r-18
Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Se
p-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan
-19
Fe
b-1
9
Ma
r-1
9
Ap
r-19
Ma
y-1
9
Jun
-19
Jul-
19
Au
g-1
9
Se
p-1
9
Oct-
19
No
v-1
9
De
c-1
9
Jan
-20
Fe
b-2
0
Ma
r-2
0
Ap
r-20
Ma
y-2
0
Mill
ions
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Structured warrants performance
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
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Why warrants
Bull & Bear
Market
Gearing
Exposure
to foreign
exchanges
Less Capital
STRICTLY CONFIDENTIAL
01What are structured
warrants?
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Types of structured warrants
Right to buy at a fixed price
Bullish view
Increase in value if the
share goes
Eg VS-C28
Put Warrant (H)
Right to sell at a fixed price
Bearish view
Increase in value if the
share goes
Eg FBMKLCI-HAI
Call Warrant (C)
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Structured warrant vs Company warrant
Structured warrant Company warrant
Stock Short Name HARTA-C43 / HSI-HAV GPACKET-WB
Issued by Third-party financial entity The underlying company
Primary use Investment tool Capital raising tool for company
Tenure Usually 6 to 12 months Typically 2 to 5 years
Expiry Settlement Cash or physical settlement Physical settlement
Market maker Yes No
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Index / ETF warrants
S&P 500® Index iShares A50Chin ETFHang Seng Index FBM KLCI Index
Index ETF
STRICTLY CONFIDENTIAL
02Understanding key warrant
indicators
PAGE 13
Exercise Price
• The price at which investor can buy (calls) or sell (puts) the underlying share
or index at expiry.
• Intrinsic value = Current underlying price – Exercise price
RM0.30
Warrant Price
RM1.00
Exercise price
RM0.10
Time Value
RM0.20
Intrinsic Value
RM1.20
Current underlying price
Assuming an exercise ratio of 1:1
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Moneyness
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
• Exercise price is also used to determine the moneyness of a warrant.
• Call warrant is:
In-the-money (ITM) if current underlying price > exercise price.
At-the-money (ATM) if current underlying price = exercise price.
Out-the-money (OTM) if current underlying price < exercise price.
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Last trading day
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
• The last day investors are allowed to buy or sell the warrant.
• Falls on the 2nd trading day prior to the expiry date.
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Effective Gearing
Example: Warrant X has an effective gearing of 8x
1% change in share approx. 8% change in warrant
Higher effective gearing
Bigger movement in the warrant
Higher profit potential but higher risk
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Warrant sensitivity
• Shows investors how much the underlying share or index must
move for a corresponding one tick movement in the warrant.
• Example: There are 2 Call Warrants (A and B) with Bursa
Malaysia shares as the underlying. The price of Call Warrant A
moves up by 1 tick as Bursa Malaysia’s share price moves up by 6
ticks whereas the price of Call Warrant B moves up by 1 tick as
Bursa Malaysia’s share price moves up by 2 ticks. Which warrant
is more sensitive?
Answer is Call Warrant B.
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View all key indicators
Warrant Terms
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
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Warrant price vs Underlying price
INARI-C61 (016661)
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
STRICTLY CONFIDENTIAL
03Selecting a warrant
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4 simple steps
Selecting a warrant
4. Liquidity of
the warrant
1. Take a view on underlying
markets
2. Set trading time frame
3. Effective gearing
The right risk and return balance
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Bullish or bearish view on underlying
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
Technical Event ® Lookup by Recognia
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Warrant expiry guideline
Trading Profile Warrant expiry to choose
Day trading As short as the same month
Short-term (up to 2 weeks) 3 to 6 months
Longer term (more than 2 weeks) More than 6 months
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What is warrant liquidity?
• Provided by the market maker/issuer.
• Parameters used to measure warrant liquidity?
1. High bid and ask volume.
2. Tight spread between best bid and best offer warrant price.
Source: Bloomberg
Past performance is not indicative of future performance.
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Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
Sold out warrants – What does it mean?
• Inventory sold out when inventory level is less than a certain threshold. E.g.
Total issuance size is 40mil units, warrant may be placed in the sold out list
when issuer’s inventory level is lower than 8mil units.
• How to determine whether a warrant is sold out?
1. The market bid/ask price is higher than the fair bid price on
Macquarie’s Live Matrix.
2. The market price movement of the warrant does not fully reflect
the price changes in the underlying share/index.
STRICTLY CONFIDENTIAL
04Useful warrant
trading tools
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Malaysiawarrants.com.my
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
PAGE 28
Warrant Search
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
Step 3Step 2
Step 1
Step 4
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Live Matrix – Trade with confidence
INARI +3.5%
INARI-C61 +10.3%
Buy
Sell
1
2
3
4
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
PAGE 30
Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
Live Matrix – Sold out warrants
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Source: Malaysiawarrants.com.my
Past performance is not indicative of future performance.
Warrants Calculator
1
2
3
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Telegram channel - Macquarie Warrants Malaysia
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Facebook Page - @MalaysiaWarrants
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Contact us for warrant matters
Call our
warrants desk
E-mail us
Warrants hotline
03 2059 8840