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ID number:365492
Author:
Evaluation:
Published: 25.07.2016.
Language: English
Level: College/University
Literature: n/a
References: Used
Extract

Conclusion
Like any other type of investment, warrants also have their advantages and risks:
Advantages
Because the prices of warrants are low, the leverage and gearing they offer is high. This means that there is a potential for larger capital gains and losses. While it is common for both a share price and a warrant price to move in parallel (in absolute terms) the percentage gain (or loss), will be significantly varied because of the initial difference in price. Warrants generally exaggerate share price movements in terms of percentage change.
Warrants can offer significant gains to an investor during a bull market. They can also offer some protection to an investor during a bear market. This is because as the price of an underlying share begins to drop, the warrant may not realize as much loss because the price, in relation to the actual share, is already low.
Disadvantages
As mentioned above, the leverage and gearing warrants offer can be high. But these can also work to the disadvantage of the investor.

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