[Very good]Knock out warrant example
KW’s are listed with a Knockout Level. If the price of the underlying index trades at that
Knockout Level at any time on or before the expiry date of that KW, the warrant
Gear/Leverage: Should the underlying index trade near the Knockout Level, the gearing offered by the warrant increases dramatically.
Gear = Gain of warrant / Gain of underlying
= [(w2-w1)/w1] / [(u2-u1)/u1]
Call & Put & Long & Short
Long Call: option to buy
Long Put: option to sell
Warrant = Call option + Issuer
Volatility is a measure of the frequency and intensity of price change of the underlying asset (a stock or an index) on which a warrant is based. It is an annualised statistic, which represents a standard deviation price change, in percentage terms, at the end of a period.