How to Buy Warrants

You can buy and sell warrants via your traditional intermediary in the same way as you do with shares or trackers. They will put your buy order through to NYSE Euronext's electronic order book.

Nonetheless before investing, it is a good idea to:

  • Read the issuing note
  • Verify the characteristics of the warrant on www.euronext.com,
  • Keep an eye on the market and watch for any actions or events that might affect your intended underlying (capital events on stocks for example).

Euronext lists thousands of warrants and certificates, and it is important to select the right warrant on the underlying you have chosen. Warrants not only have different prices, their potential price development is also different as they all have different expiry dates, investment profiles, characteristics and strike prices.

You should never select a warrant or a certificate purely on the basis of its absolute price. Although the absolute price of a warrant or certificate may be low, its relative price may be very high. You should therefore take into account the intrinsic value of the warrant, or the value which it would have if it were exercised immediately.

Two other useful indicators for selecting warrants are the delta and elasticity. These are values that reflect the situation at a particular moment in time and allow you to compare warrants objectively. These values can be calculated for all warrants, and information about them can be found on the websites of most issuers.

Trading warrants
Warrants are traded on NYSE Euronext's cash market in the same way as shares. They can be bought and sold throughout the day from 9.05 a.m. to 5.25 p.m. Warrants can be traded through your bank or broker, who will send your buy or sell order to the exchange. It is advisable to state a limit price for your order, so that you do not have to pay more or receive less than you intended.

Transaction fees differ depending on the intermediary involved. Your bank or broker will tell you which fees apply to you. There is often a minimum trade size for warrants. If the minimum size is 1,000, it means you can buy and sell the warrants in batches of 1,000.

Price fluctuations and trading freezes
NYSE Euronext has specific trading rules for warrants and certificates, which are intended to protect investors from sharp price movements. Trading in a warrant is frozen when a new order is entered in the order book and its execution results in a price movement that exceeds the relevant threshold. The thresholds are maximum acceptable price movements and are stated in percentages. Following a trading freeze, NYSE Euronext will automatically resume trading in the warrant.

Liquidity provider system
To ensure that investors are always able to buy and sell warrants at good prices, NYSE Euronext has concluded liquidity agreements with all the major warrants issuers. Under these agreements, all orders placed by issuers (or "liquidity providers") must comply with strict criteria regarding maximum spreads and minimum quantities throughout the trading day.

Under certain circumstances, such as system breakdowns or unusual market conditions, NYSE Euronext can release liquidity providers from their obligations, making it potentially difficult to trade in the affected warrants.

Last day of trading
The last day of trading in a warrant is not always the warrant's expiration date. In Brussels and Paris the last day of trading in warrants may be six days before the expiration date, while warrants listed in Amsterdam and Portugal may be four days before the expiration date. It is important that investors carefully check the contract specifications of their warrants.