Trading Warrants

Features

Trading Warrants offer you short-term exposure to an underlying asset (like a share, currency, commodity or index) by paying a portion of the underlying asset price upfront.

Since they were first listed by Macquarie Bank in 1991, Trading Warrants have become a very popular tool among traders, investors and risk managers. Trading Warrants provide the opportunity to achieve leveraged returns, benefit from both a rising or falling market, diversify into a market or sector and protect the value of the underlying asset.

Key benefits

• Increase your exposure to an underlying asset by paying a portion of the underlying asset price upfront
• The potential for greater returns (at a higher risk) than a direct investment in the underlying asset
• The opportunity to benefit from both increases (in the case of a call warrant) and decreases (in the case of a put warrant) in the value of the underlying asset
• No margin calls.

Types of Trading Warrants

Macquarie offers a range of Trading Warrants, which vary according to the underlying asset to which the warrant is linked. The type of warrant and the underlying asset that warrants are available over varies depending on the jurisdiction and exchange.

How do they work?

Trading Warrants are similar to option contracts, except that they are typically issued by an investment bank like Macquarie Bank Limited (the issuer) and are quoted on the ASX. Trading Warrants provide underlying exposure to a share, asset or index. Each series of Trading Warrants may have a different structure and terms of issue.

In addition to providing exposure to different underlying assets, Trading Warrants may be either “call warrants” or “put warrants”.

Call warrants

A call warrant gives the holder the ability to benefit from an increase in the value of the underlying reference asset above a nominated price (the exercise price) at a specific future date (the expiry date). The buyer of a call warrant will generally benefit from a rise in the underlying asset price, all other factors being equal.

Put warrants

A put warrant gives the ability to benefit from a decrease in the value of the underlying reference asset below a nominated price (the exercise price) at a specific future date (the expiry date). The buyer of a put warrant will generally benefit from a decline in the underlying asset price, all other factors being equal.

Trading Warrants investment cycle

Key risks

Some of the significant risks of investing in Macquarie Trading Warrants include:

• The adverse performance of the relevant reference asset decreasing the value of your investment
• Trading Warrants often incorporate a high level of leverage (compared to a direct investment in the relevant reference asset) and in such circumstances should be considered a high risk investment
• You should also give careful consideration to the performance required of the relevant reference asset in order for you to break-even in relation to an investment in a Macquarie Trading Warrant.

An investment in warrants does not suit investors seeking a traditional investment product (such as shares). You should refer to the Product Disclosure Statement for more information about some of the significant risks of investing in Macquarie Trading Warrants.