Learn: Structure warrant -example

Learn: Structure warrant -example

Good afternoon all,

There were 7 warrants listed by RHB which expired on 30 Jan 2018 and many more expiring in February. So what will happen to them and do you know whether you will be getting any payout from holding the warrants until maturity? In this article, you can determine exactly how much you will be getting upon expiry.

Step 1: Is my warrant IN or OUT of-the-Money?

For a call warrant, if the Settlement Price is above the Exercise Price/Strike, then the warrant expires In-The-Money (“ITM”), otherwise it is considered Out-of-The-Money (“OTM”). If the Settlement Price is exactly the same as Strike, it is At-The-Money. You will only receive a cash payout for an ITM warrant.

Step 2: How much cash payout do I get?

The following shows how to calculate the cash settlement amount for a call warrant:

( Settlement Price  - Exercise Price  )  / Exercise Ratio  x units of warants held

Please take note that RHB charges an exercise fee of 0.3% plus GST on the cash pay-out amount. The Settlement Price is the average 5-day closing mother share price before expiry. For easy reference, RHB will usually announce the Settlement Price and the calculated cash settlement amount per warrant on Bursa website on the expiry date.

Example: DRBHCOM-C38

Exercise Price : RM 1.7800

Exercise Ratio : 2.5 warrants to 1 share

Expiry Date : 30 January 2018

Warrants held : 100,000 units

Settlement Price : Average 5-day closing share price from 23 – 29 Jan = RM2.6200

Cash Settlement Amount :

(2.6200 - 1.7800) / 2.5 * 100,000 units

= RM33,600 – exercise fee with GST

= RM33,493.15

RHB cash-settled call warrants that expired on 30 Jan 2018

Call warrant	Exercise Ratio	Exercise Price (RM)	Settlement price (RM)
DRBHCOMC38	2.5	1.7800	2.6200
EWINT-CG	2	1.1000	1.0980
FGV-C32	2.5	1.6500	2.0020
JTIASA-CP	1.5	1.1500	1.1020
LCTITAN-CF	7	6.2800	5.1240
PCHEM-C11	5	7.1500	8.0080
SAPNRGC47	2	1.7000	0.7980

Term sheets for our call warrants are available in the Bursa Website:

http://www.bursamalaysia.com/market/listed-companies/structured-warrants/#/?category=all