What are they?

Before trading you should fully understand the nature of covered warrants and your exposure to the risk involved. The geared nature of covered warrants means that a relatively small movement in the share price of the underlying asset will result in larger movements in the value of the warrant. Therefore, covered warrants provide the opportunity for greater returns than ordinary share dealing but also greater risks and potential losses. If you are in any doubt you should consult an Independent Financial Advisor.

Covered Warrants enable you to take a view on either a rise or a fall in a wide-range of assets such as shares, indices or commodities. They are listed on the London Stock Exchange, so they are highly regulated and easily accessible during trading hours.

Unlike investing in shares, an investment in Covered Warrants will have a fixed life with an expiry date typically set three, six or twelve months in the future. They are purchased for a premium, which is represented by the ‘ask price’. Low trading amounts enable investors to access the markets with potentially limited capital at risk. In theory an investor could buy just one Covered Warrant at a price of as little as 20 pence plus the broker fee.

There are two types of Covered Warrant. Call Covered Warrants enable you to benefit from a rising market. On expiry, the Call Warrant will generate a cash payout if the asset price has risen above a fixed level called the strike price.

Put Covered Warrants however may generate a cash payout on expiry if the asset price has fallen below the Strike Price. These can be used for both investment purposes and to protect a portfolio from falling prices.

On expiry, a Covered Warrant automatically deposits any funds owed to your share dealing account. Covered Warrants may also be sold prior to their expiry using the ‘bid price’. At any point during a trading day you can trade in or out of a position and take any profit or realise losses.