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What are Warrants and Certificates? - Part 2


What are the most traded types of Warrants & Certificates, why are leverage products with knock-out the most traded type, how can I invest in Warrants & Certificates, and should I start trading them?

Alexandre Atlani, Head of Warrants & Certificates at Euronext answers these questions.

Listen to the full interview, watch the video:

And check out part 1

What are the most traded types of Warrants & Certificates?

By far leverage products are the most traded product types, with about 95% of the volumes in 2022.

Within leverage products, products with knock-out, also known as turbos, represent about three quarters of the volumes. And leverage products without knock-out, mostly warrants, represent about 20% of the volumes.

Why are leverage products with knock-out the most traded product type?

We can think of a few reasons for that.

  • There is a wider range of turbos available for investors to choose from.
  • Turbos cover a wider range of underlyings and they are usually easier to understand.
  • Although they can be considered riskier than other products because of the knock-out barriers, turbos are usually only sensitive to the price of the underlying while for the other product types, there can be many factors influencing their price.

How can I invest in Warrants & Certificates?

Warrants and certificates are listed and traded on an exchange like Euronext, regardless of their underlying.

For example, to trade on warrants and certificates whose underlying is a US stock, there is no need to invest on a US market. This product is listed on Euronext and can be traded the same way the share of a company listed on Euronext can be traded.

In general, warrants and certificates trade on Euronext in euros, regardless of the currency of their underlying.

Investors can send their orders via their online banks or brokerage accounts who usually charge relatively modest fees and commissions on these instruments, in opposition to trading securities on foreign markets.

To help keep fees as low as possible, Euronext does not charge any client fees to its trading members for all orders on warrants and certificates below €6,000.

Finally, the warrants and certificates of some issuers can trade between 08:00am and 10:00pm CET.

Investors are invited to check with their financial intermediary if they offer access to these extended trading hours. 

So should I start trading Warrants & Certificates?

The world of warrants and certificates can be fascinating because of the diversity of product types, strategies, underlyings and geographical regions covered.

But investing in these instruments can be risky. Yes, you can make some good or very good returns on investment, but as well you can lose some or all the money invested. Therefore, it is essential to understand the products you are interested in investing in. To that goal, issuers are a fantastic source of knowledge and support.

They offer a lot of educational content, websites and call centres where specialists are available to answer all questions about warrants and certificates.

So make sure you feel confident in your understanding of warrants and certificates before investing!

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