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Andrew McHattie on Covered Warrants

New opportunities in an exciting new market

By Andrew McHattie
Cover of Andrew McHattie on Covered Warrants (Paperback) by Andrew McHattie

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About the Author

Andrew McHattie

Andrew McHattie is editor and publisher of Warrants Alert, Covered Warrants Alert and a number of other investment newsletters. He previously worked for Phillips & Drew on international gilt trading and on their European equity desk.

Contents Listing

Introduction
For novices and more experienced investors alike
Preview of chapters
Focus on UK but with lessons from elsewhere

1. What is a Covered Warrant?
Definition and basic attributes
Comparison between corporate warrants and covered warrants

2. Overseas Markets
Germany
Italy
Euronext
Switzerland
Spain
Scandinavia
Australia
Hong Kong
Singapore
Japan
South Africa
Canada
Why not the US?
Lessons

3. History & Development (i) - Out With the Old
From boom to bust in a decade
Limited issuance and liquidity
Lack of rights for warrant holders
Dead, or only resting?

4. History & Development (ii) - In With the New
Regulatory Development
The listing rules
The conduct of business rules
Issuers
Method of issue
Time and trading

5. Types & Terms of Covered Warrants
Calls and Puts
European and American
Warrants per share
Stock Warrants
Changes to the terms
Basket warrants
Index warrants
Bond warrants
Commodity warrants
Currency warrants
Exotics
Barrier warrants
Corridor warrants
Trigger warrants

6. Pricing and Trading
Warrant Information
Pricing
Market-making
Price influences
Bid-only and offer-only warrants
Cash settlement
Stockbroking

7. Advantages and Disadvantages
Gearing
Unlimited gains, limited losses
Ease of accessibility and transparency
Good liquidity
Low transaction costs
Designed as a retail product
Opportunities in bull and bear markets
Range better than ever before
Aid to diversification
Ability to invest in assets otherwise unavailable
Rational price movement
Stock Exchange listing
Provision of information and education

Complexity
Adverse price movements
Premium
Limited life
Time value decay
Absence of price anomalies
No income
Scope still limited
No benefit to, or direct link with, companies
No shareholders' rights
Need to have internet access
Capital gains tax
Credit risk

8. Analysis of Covered Warrants (i) - Getting started
Fundamental analysis
Chart analysis
Homework - prices and terms
Gearing
Intrinsic Value
Premium
Break-even point
Capital fulcrum point

9. Analysis of Covered Warrants (ii) - Advanced
Black-Scholes
Volatility
The Greeks
Leverage
Concluding remarks

10. Risk
Risk warning
A salutary example
Takeover risk
Credit risk
Currency risk
Managing risk
Measuring risk
Value at risk
Taking responsibility
Advice

11. Strategies
Speculation
Hedging
Delta neutral hedging
Cash extraction
Long-shot investing
Straddles and strangles

12. The Future
A look ahead to how the market might develop

Sources of Further Information
Web addresses

Glossary

Bibliography

Index
Introduction
For novices and more experienced investors alike
Preview of chapters
Focus on UK but with lessons from elsewhere

1. What is a Covered Warrant?
Definition and basic attributes
Comparison between corporate warrants and covered warrants

2. Overseas Markets
Germany
Italy
Euronext
Switzerland
Spain
Scandinavia
Australia
Hong Kong
Singapore
Japan
South Africa
Canada
...

Jacket Text

The traditional company warrants market is set to be eclipsed by a new market which should offer huge opportunities for active investors. Revised regulations have paved the way for a new 'covered warrants' market in London.

- The number of warrants available for trading by private investors on the London Stock Exchange (LSE) will multiply many times over.

- Warrants will become available on a broad range of blue-chip companies, sector baskets, and on both UK and overseas indices.

- Investors will be able to buy both calls and puts.

- The vast majority of the new warrants will be exercisable for cash which will mean they can be traded free of stamp duty.

This book is intended as a primer for investors new to covered warrants, although more experienced investors may also find some value in the timely information about the formation of the new market in London. Readers used to dealing in traditional listed warrants in the UK will find the new covered warrants quite different. Jargon is unavoidable, but it is explained in the text and in the glossary at the back.

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