Author: kltrader | Publish date: Fri, 28 Aug 2015, 10:32 AM
A total of 10 warrants comprising 6 HSI and 4 China A50 warrants are expiring today, Friday, 28th August. The expiring HSI warrants consist of HSI-CM, HSI-CN, HSI-CO, HSI-HA, HSI-HB, HSI-HC while the expiring China A50 warrants consist of CHINA50-C1, CHINA50-C2, CHINA50-H1 and CHINA50-H2.
What happens upon expiry?
The settlement value of an index warrant is dependent on the settlement level of its underlying futures for the same expiry month. For example, a call warrant will only have value at expiry if the closing level of its underlying futures is above the call warrant’s exercise level. This call warrant is said to be in-the-money (ITM), and therefore it will be automatically exercised upon expiry.
On the other hand, for a put warrant, the closing level of the underlying futures must be below the exercise level of the put warrant for it to be in-the-money.
Important dates for expiry
As with all structured warrants listed by Macquarie in Malaysia, the last trading day will be 3 market days before the expiry day.
What is settlement level?
The settlement level of the futures is the final settlement price for settling the corresponding spot-month index futures contracts. In this scenario, the settlement level is the closing level of HSI and China A50 futures in the month of August 2015 futures contract.
How to calculate the Cash Settlement Amount upon expiry?
For Call warrants
= Number of Call Warrants x (Settlement Level – Exercise Level) / Exercise Ratio x FX Rate
For Put warrants
= Number of Put Warrants x (Exercise Level – Settlement Level) / Exercise Ratio x FX Rate
Hypothetical example for HSI-HC (Expiry on 28th August, exercise level of 23,400)
Suppose on 28th August, the Hang Seng Exchange announces the settlement level of the HSI August 2015 futures to be 22,200 (after market hours) and the exchange rate for HKD/MYR is 0.50. The HSI-HC with an exercise level of 23,400 will expire with the following settlement amount:
(23,400 – 22,200) / 900 x 0.50 = RM 0.6667 (rounded to 4 d.p) per warrant
If you are are still holding 10,000 units of HSI-HC warrants after the warrant’s last trading day on 25th August 2015 (Tuesday), you will receive RM 6,667.00 which is calculated as per below:
10,000 units of HSI-HC x RM 0.6667 per warrant = RM 6,667.00.
These warrants will be automatically exercised at 5.00 pm on 28th August and a cheque for that amount will be mailed to the relevant warrants’ holders within 7 market days after the expiry. The exercise expense for all warrants listed by Macquarie will be absorbed by Macquarie.
For further questions, please call us at 03 2059 8840.
Source: Macquarie Research - 28 Aug 2015
What happens upon expiry?
The settlement value of an index warrant is dependent on the settlement level of its underlying futures for the same expiry month. For example, a call warrant will only have value at expiry if the closing level of its underlying futures is above the call warrant’s exercise level. This call warrant is said to be in-the-money (ITM), and therefore it will be automatically exercised upon expiry.
On the other hand, for a put warrant, the closing level of the underlying futures must be below the exercise level of the put warrant for it to be in-the-money.
Important dates for expiry
As with all structured warrants listed by Macquarie in Malaysia, the last trading day will be 3 market days before the expiry day.
What is settlement level?
The settlement level of the futures is the final settlement price for settling the corresponding spot-month index futures contracts. In this scenario, the settlement level is the closing level of HSI and China A50 futures in the month of August 2015 futures contract.
How to calculate the Cash Settlement Amount upon expiry?
For Call warrants
= Number of Call Warrants x (Settlement Level – Exercise Level) / Exercise Ratio x FX Rate
For Put warrants
= Number of Put Warrants x (Exercise Level – Settlement Level) / Exercise Ratio x FX Rate
Hypothetical example for HSI-HC (Expiry on 28th August, exercise level of 23,400)
Suppose on 28th August, the Hang Seng Exchange announces the settlement level of the HSI August 2015 futures to be 22,200 (after market hours) and the exchange rate for HKD/MYR is 0.50. The HSI-HC with an exercise level of 23,400 will expire with the following settlement amount:
(23,400 – 22,200) / 900 x 0.50 = RM 0.6667 (rounded to 4 d.p) per warrant
If you are are still holding 10,000 units of HSI-HC warrants after the warrant’s last trading day on 25th August 2015 (Tuesday), you will receive RM 6,667.00 which is calculated as per below:
10,000 units of HSI-HC x RM 0.6667 per warrant = RM 6,667.00.
These warrants will be automatically exercised at 5.00 pm on 28th August and a cheque for that amount will be mailed to the relevant warrants’ holders within 7 market days after the expiry. The exercise expense for all warrants listed by Macquarie will be absorbed by Macquarie.
For further questions, please call us at 03 2059 8840.
Source: Macquarie Research - 28 Aug 2015
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