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Trading in warrants
A warrant is an option that gives you the opportunity to participate in the market and take on a large exposure by investing a relatively small capital sum. This creates the opportunity for big gains, but also involves big risks. Before you decide to buy any warrant, you should carefully consider the information provided in the issuer's base prospectus as well as the final terms for the particular warrant in question.
Warrants are normally issued by a financial institution, and are traded in the secondary market in the same way as shares. On the final day of a warrant's life, known as the expiration date, the investment is settled either by cash settlement (the most usual form) or by delivery of the underlying share/instrument. Settlement at expiry must take place automatically, with no requirement for the holder to take any action.
The underlying for warrants must consist of the following:
- shares or other financial instruments
- an index, a basket of shares or other financial instruments
- currency or a basket of different currencies
- commodity or a basket of different commodities
Call warrants and put warrants
Warrants give the investor the possibility of earning money in both a rising and falling marketWarrants gjør det mulig å tjene penger på både oppgang og nedgang i det underliggende instrumentet. Issuers interested in listing warrants on Oslo Børs should note that both call warrants and put warrants can be issued, on either American or European terms.
An investor who believes in an increasing market would normally buy a call. The higher the market rises, the more the investor will gain. On the contrary, an investor believing in a market decrease will buy a put. The holder of a put will gain more as the underlying falls