Professionals talk about derivatives - financial products whose value is contingent on another financial instrument, or ‘underlying’. The main categories of derivatives are futures, forwards, and options. Warrants are nothing more than securitised options (ie. negotiable instruments with physical certificates). In the financial sense, options and warrants are identical. As securitised options, warrants can be traded easily and in small quantities.
Futures and options are forward transactions, ie. They are based on a transaction which will only be executed in the future. Options are not a modern invention. In the seventeenth century options were sold on tulip bulbs in Holland. In the mid nineteenth century a commodities forward market opened in Chicago. Only in 1973, the two American professors, Black and Scholes, developed the mathematical principles for analysing options which is still the standard today. You do not have to study the mathematical formula, if you want to know about options, you just have to understand the principles on which options are based.
Ultimately the decision whether or not to buy a warrant will be based on your personal view of how the price of an underlying asset, will develop. The person who knows more and has a better feel for the markets will do best. By buying and selling warrants you have an opportunity to earn an above-average return on your investment.
To help you to achieve the most from this type of investment, we would like to give you the following tips:
- always be informed about the current price of your warrant
- always be prepared to sell your warrants
- never put more money into warrants than you can afford to lose, if the worst happens
- never buy warrants on credit
The Financial Products referred to on this page are issued by Citigroup Global Markets Australia Pty Limited (ABN 64 003 114 832 and AFSL No. 240992, a Participant of the ASX Group and a Participant of the Sydney Futures Exchange Limited. This Site is provided for information purposes only and is not an offer, solicitation, recommendation or advice to buy or sell CitiWarrants®. While the information is based on sources believed to be reliable, we do not guarantee its accuracy and it may be incomplete or out of date. For complete and accurate information on CitiWarrants, refer to the relevant Product Disclosure Statement on this Site. Prices quoted may differ from the actual prices at which an investor may buy or sell a Warrant. Warrants can be traded on ASX and investors can obtain a copy of the Product Disclosure Statement by contacting a Citigroup Wealth Advisor Financial Consultant or the CitiWarrants Hotline on 1300 30 70 70. Investors may also apply for CitiWarrants under the Product Disclosure Statement. Warrants are not bank deposits or obligations of, or guaranteed by, Citibank, N.A., Citibank Pty Limited or any of its affiliates or subsidiaries and are subject to investment risks, including the possible loss of the principal amount invested. This information does not take into account the investment objectives or financial situation of any particular person. Investors should be aware that there are risks of investing and that prices both rise and fall. Investors should seek advice from a Financial Consultant based on their own circumstances before making a decision. Citigroup and the Umbrella Device logo are service marks of Citigroup Inc. or its affiliates used and registered throughout the world. © 2006 Citigroup Global Markets.