A warrant is a derivative. It gives the buyer the right to buy or sell the underlying asset at a set price within a certain time. The underlying asset can be stock, market index, currency or commodity.
Some Hong Kong investors like warrants, as they can make big gains with a small investment. This is because it's cheaper to buy warrants than investing in the underlying assets. After working out which way the price of the assets will move, you choose a suitable warrant. If you are right, you will profit.
The structure, pricing and the way warrants work are complicated. The risk of investing in warrants is also high. So, it's not suitable for inexperienced investors, or people who are less risk tolerant, such as retirees.
Learn more about warrants in the following sections.
Choosing a warrant
Things to note