Inline Warrants
What is Inline Warrants?
Inline Warrants are a type of structured product that entitles the investors to receive a pre-determined fixed payment at expiry. At expiry, investors will receive HK$1 per inline warrant held when the underlying asset falls at or within the Upper and Lower Strikes (In-The-Range) or HK$0.25 per inline warrant held when the underlying asset falls outside the Upper and Lower Strikes (Out-of-The-Range).
Due to the pre-determined fixed maximum payment at expiry of HK$1, an inline warrant should not be traded above HK$1. Investors will suffer a loss by buying an inline warrant above HK$1.
Inline Warrants may be issued with a lifespan of six months to five years. They may be bought and sold prior to their expiry on the cash market of HKEX. At expiry, settlement is made in cash only.
Eligible Underlying Asset
1. HSI
2. Top 5 most liquid stocks by turnover [1]
- Tencent (700)
- Ping An (2318)
- CCB (939)
- AIA (1299)
- China Mobile (941)
Stock Code Allocation Table for Inline Warrants
Ranges | 47000-48999 |
________________________
Basic Information
- Eligible Underlying:HSI、Top 5 most liquid stocks by turnover ﹝subject to review after launch﹞
- Strike Prices:Must have 2 strike prices ﹝Lower and Upper Strikes﹞
- Minimum Fixed Payment at Expiry :HK$0.25 [1]
- Maximum Fixed Payment at Expiry:HK$1.00 [2]
- Investors’ Maximum P&L
Maximum Profit = HK$1 – Cost of Inline Warrant
Maximum Loss = Cost of Inline Warrant – HK$0.25 - Valuation at Expiry
Index underlying: Final settlement price of the underlying index futures contracts with same expiry month of inline warrants
Stock underlying: Average of the closing prices of the underlying stock for five trading days immediately preceding expiry day - Duration:Minimum 6 months
- Settlement:Cash
_______________________
Features
Upper and Lower Strikes, with no knockout barrier
In-The-Range (ITR): fixed payment of HK$1
Out-of-The-Range (OTR): fixed payment of HK$0.25
** Investors will suffer a loss by buying an inline warrant above HK$1
Maximum upside and downside is known at the time of investment
Can be bought and sold before expiry or held until maturity
Advantages
- Range trading vs directional trading (DWs or CBBCs)
- Possibility to make profits in a sideway or flat market
- Investors may choose from different strike prices to express their views on the underlying stock price or index level
Risks
- Profit potential is capped by the pre-determined payment
- Maximum loss is limited to initial investment
- Trading above HK$1 may not reflect the true value of the inline warrant
ZZ – Issuer’s short name
Q – Underlying asset (up to 5 characters)
@ – Cash settlement
L – Inline Warrant
YYMM – Expiry year and month
A – Serial number for additional issues by the same issuer on same underlying with same expiry year and month (A, B, C …)