Please scan QR code to subscribe Mason Financial via WeChat
(Chinese version only)

Warrants & CBBCs


A warrant is a right but not an obligation to buy or sell a certain underlying assets (stock, index, currency, or commodity), at a pre-determined price (called the Strike price or Exercise price), on or before a pre-determined expiry date. There are two different types of warrants, commonly called company warrants and covered warrants. Company warrant is a funding exercise for the corporation that issues call warrants over its own stocks. On exercising, the company will issue new shares and deliver them to the exercising warrantholders against payment of the exercise price. A covered warrant is usually issued by an investment bank. The bank does not issue a warrant as a funding exercise but in order to provide investors with an efficient tool to manage their investment portfolio. The covered warrant is a listed security, traded on an exchange and constitutes a contract between the issuer and buyers of the warrant. The obligations of the issuer are materialised by the listing documents that detail all terms and conditions of the issue.

Callable Bull / Bear Contracts (CBBCs)

A CBBC is similar to other derivative warrants in the way that it is structured to let investors track the performance of an underlying asset (like stocks or indices, etc.) without being required to pay the full price required to own the actual asset. A CBBC has a leverage effect and is issued with the condition that during its life span it will be called by the issuers when the price of the underlying asset reaches a level (known as the "Call Price") specified in the listing document. If the Call Price is reached before expiry, the CBBC will expire early and the trading of that CBBC will be terminated immediately. The specified expiry date from the listing document will no longer be valid.