From "life cycle" to see the investment characteristics of the C of E

Leverage of the warrants has been the most attractive one significant advantage. If the implied volatility rate unchanged, due to the existence of the lever, rose C of E will go beyond the general decline in stocks is the decline in inflation and higher leverage, the greater the rate beyond. However, due to the high valuation of warrants, warrants species of scarcity of short-and the lack of mechanism and other factors, making China's listed to delisting from the C of E, at various stages have shown a markedly different characteristics, our image and known "Warrants the life cycle."

SFC2 from the deep and the warrants expire before the historical trend, it can be summed up in China warrants the general rules of operation, namely, the C of E's "life cycle" can generally be divided into the following four stages:

The first phase, worth over stage. Since China's stock market "speculation new" practice, the warrants listed in the beginning of the general be greater degree of overestimation. But at this stage normally does not last long, especially when Liu Tongpan larger or market adjustments, the duration will be shorter.

The second phase, the value of the reunification stage. During this period, warrants a premium rate and implied volatility to the section C of E to move closer to the average level.

The third stage, footsteps stage. C of E trend at this time would show a certain "inertia" and "rigid." The so-called "inert" refers to the trend of warrants and the shares are almost the same trend, reflected leverage of the more difficult. The so-called "rigid" means if there are shares rose sharply, the prices of warrants and the extent to constantly improve internal and external price, premium rates continue to decline, and some have even greater discount; On the contrary, if there are stocks fell sharply, the C of E Prices and the declining price level and beyond, when the price dropped to a certain extent, will refuse to continue to (sharp) decline warrants a premium rate rising.

The fourth stage, the intrinsic value of the reunification stage. This stage, the warrants will accelerate the return of intrinsic value (price of warrants will be "zero"), warrants and the price of premium rate will continue to decline, but the leverage of rising. Because of the highly leveraged, are not willing to warrants for "calm" the return of General Federation of frenzied speculation took the opportunity to have idle funds. Of course, if the due date, the C of E is still deep in the price of warrants, and the premium rates near zero, the trend will be relatively stable, and the trend of discount warrants will be slightly stronger than the underlying shares.

In addition, the study found that price level, the price of the warrants and depth of the same price with similar "life cycle" characteristics. Therefore, a good grasp of the C of E "life cycle" investors warrants will have a certain significance. Specifically, first of all warrants should be avoided in the first, second and fourth stages of buying warrants. The first two stages, the higher the valuation of warrants, warrants to buy than buying stocks. In the fourth stage, low prices may bring opportunities, but the risk will be greater at this time. Second, in the third stage, when warrants in the course of show up at the rigid (resistance), investors should moderate sell-off. In the course of performance down to rigid time (support), investors may be modest overweight warrants. Finally, investors should grasp the event-driven investment opportunities. In the warrants, are sharp adjustment, if introduced good policies or events, warrants will be better than the performance of the underlying shares.