How to buy and sell warrants
Warrants, the classic leverage products, are usually issued by banks. You can find a wealth of warrants on various underlyings, for example at Vontobel, UBS*, Societe Generale or BNP Paribas. The financial institutions that issue warrants issue them as bearer bonds. When they are issued by a financial institution, warrants are given a security number or an International Securities Identification Number (ISIN) in order to be able to uniquely identify the warrant.
Originally, warrants were also issued by companies to secure their funding. At that time, warrants were often linked to bonds. In this case, the issuer assured the buyer the right to purchase company shares at a predetermined price. It was only in the 1990s that it became common to also issue on other underlying assets and not to link them to (corporate) bonds.
As an investor, you can buy warrants either from the issuing house or through the traditional stock exchanges.
In addition to a custody account with a broker or a bank, investors also need a kind of “permission” to trade warrants: they must first acquire the ability to trade in financial futures.
Our recommendation: Warrants are considered speculative asset classes. Therefore, before making an investment, familiarize yourself with the risk information.
As a rule, the broker will issue financial futures transactions without any problems if you have proven that you already have experience in trading speculative investments such as warrants, or that you are aware of the relevant forms or instructions for trading in warrants.
You can find suitable warrants in various ways. If you already know which underlying your warrant should be based on, it is also worthwhile with issuers such as Vontobel, UBS*Société Générale or BNP Paribas to search for suitable products
Once you have acquired financial futures trading capability and selected a suitable product, the Valor or ISIN will help you to identify the warrant beyond any doubt. You can then purchase the warrant over the counter directly from the issuer issuing the product. To do this, he asks his broker the price for the warrant and then has the option of buying it or canceling the purchase. In direct trading, warrants can also be purchased outside of regular stock exchange opening hours. In this way, investors who buy warrants in over-the-counter trading can benefit from current developments on the US stock exchanges.
In addition to direct trading, warrants can also be purchased in regular stock exchange trading – for example via deriBX*, the trading segment of BX Swiss. To buy a warrant, warrant buyers use special exchanges. The advantage is that investors can place limited buy and sell orders when trading on the stock exchange. In exchange trading – unlike in direct trading – however, an additional brokerage fee is charged for the stock exchange operator. However, this is relatively small. The stock exchange operators offer a marketplace regulated by public law with a high level of transparency. A set of rules that requires certain trading standards and independent trading monitoring ensure high trading quality, which makes trading with warrants safer than buying warrants in direct trading.