Warrants: a financial derivative product

These are securities that grant the right to buy or sell company shares or other assets at a fixed price for a specified period.

WARRANTS FINDER

Invest in derivative products

Derivative products are another investment option available to certain investor

These products are financial instruments whose value derives from the performance of the price of another asset, called the “underlying asset”. The underlying asset of a derivative can be anything from a share or a basket of shares, to fixed income securities (bonds, debentures), currencies, raw materials, etc.

A derivative implies a term contract in which all the conditions are set out at the time of the agreement (nominal amount, underlying asset, maturity date) and the effective exchange occurs at a future date.

They are complex products, requiring previous knowledge and experience.

What are warrants?

Warrants are a type of financial derivative product.They are negotiable options on the financial markets that include the right to buy or sell an (underlying) asset at a strike price and within a specified period.

This means that when buying a warrant, you are not acquiring the underlying asset itself, but the option to make a future purchase or sale transaction on that underlying asset. The acquirer of a warrant has the right, but not the obligation, to buy or sell the underlying asset or part thereof at a fixed price (strike price) on the maturity date.

The investor can decide to exercise this right or not based on the price of the underlying (settlement price) on maturity in relation to the strike price (the price at which the warrant holder is entitled to buy the underlying asset).

There are purchase (call) and sale (put) warrants:

CALL WARRANT

The holder has the right to buy the underlying asset at the strike price. If the price of the underlying asset at maturity is greater than the strike price, the contract will be settled by paying the owner of that asset the resulting difference.
PUT WARRANT

The holder has the right to sell the underlying asset at the strike price. If the settlement price is lower than the strike price, the contract will be settled by paying the holder the difference.

Depending on the moment at which the right can be exercised, warrants can be American type (can be exercised throughout the life of the warrant until its maturity) or European (The right to buy or sell can only be exercised on the maturity date).

Who can invest in warrants?

Warrants are a complex and risky financial product aimed at experienced investors. They are not suitable for all investors, as they require experience and an extensive knowledge of the financial market since constant monitoring of the position is necessary due to the possibility of losing the entire investment.

How can I invest derivative products?

If you want to start investing in derivative products, you can do so at Banco Santander through:

ONLINE BANKING

If you are a customer, enter your private area and access the Savings and Investment menu.

All this from just €3 per transaction, up to €2,000¹.