Elizabeth Tian, Director - Citi Markets starts her presentation by explaining stop loss warrants have become one of the most popular style of warrants with the feature present in both trading and investment warrants.
Warrants because they are a limited recourse loan will have either a stop loss or built in put protection feature.
When a stop loss level is triggered the warrant is suspended and residual value passed back to the investor.
Stop Loss levels :
MINI Long Trading Warrants : Stop Loss level > Strike price
E.g. Stock Price $15, Strike Price $10, Stop Loss level $11
MINI Short Trading Warrants : Stop Loss level < Strike price
E.g. Stock Price $10, Strike Price $15, Stop Loss level $14
In the case where the stop loss levels are triggered the warrant investor is paid out the difference between the be stop loss level and the strike price.
In some circumstances however no residual remains where the stock has gapped. In the case case of MINI short warrant if the stock price opens above the strike price, in the case of a takeover offer or earnings upgrade no residual value will be paid........
