Warrants

For the investor who wants to diversify their portfolio, warrants provide an alternative way to be exposed to assets such as shares. On top of a new security, companies will often issue warrants as an added attraction for buyers.

What are Warrants?

Dividend seaon comes straight after the reporting season and for the stocks listed on the Australian Stock Exchange (ASX) these events come around yearly around February and August. Using instalment warrants allows investors and traders to maximise their dividend income. Investors may want the exposure to the franking credits as well as the increased income, while traders may see the increased dividend and franking credits as a bonus to their regular trading strategy - perhaps looking to profit after an ex-dividend rebound if the shares are especially bullish.

December 2005 did not stop new records being set for the warrants market. Total traded premium in a calendar year reached a phenomenal $6.54 billion. The instalments market traded premium reached $4.06 billion representing a 62% increase on the 2004 traded premium value of $2.5 billion. Check out the figures in the trading volumes for the number of warrant trades completed.

A warrant is a financial instrument issued by banks and other institutions and traded on ASX. Warrants provide investors an alternative way to gain exposure to a variety of underlying assets, such as shares, to achieve a desired result.