Frequently Asked Questions

What is a covered warrant?

Covered warrant is a securities type of options, which is approved by SSC and issued by qualified securities company in Vietnam and trading in Ho Chi Minh Stock Exchange. As a type of warrant/options, covered warrants give the holder the right, but not the obligation, to buy an underlying asset at a predetermined price (strike price) before a specified expiration date. In the Vietnam market, only European-style call warrants are available. The underlying assets are limited to VN30 index components that satisfy multiple regulatory conditions as specified by SSC regulations. Learn more in our Understanding Covered Warrants guide.

What types of covered warrants are available in Vietnam?

In the Vietnam market, only call warrants are available. Call warrants give you the right to buy the underlying asset at the strike price. You would buy a call warrant when you expect the price of the underlying asset to rise. Put warrants, which give the right to sell the underlying asset, are not currently available in the Vietnam covered warrant market.

What are the underlying assets for covered warrants in Vietnam?

In Vietnam, covered warrants are only issued on underlying assets that are components of the VN30 index. Additionally, these underlying assets must satisfy multiple regulatory conditions as specified by SSC (State Securities Commission) regulations. Not all VN30 components automatically qualify - they must meet specific requirements related to liquidity, market capitalization, trading volume, and other criteria set forth by the regulatory authority.

The Ho Chi Minh Stock Exchange (HOSE) releases the available underlying asset list each quarter on their official website at https://www.hsx.vn/en/quan-ly-niem-yet/cw. Investors can refer to this list to see which stocks are eligible as underlying assets for covered warrants.

What's the difference between covered warrant (Call) and margin loan?

While both covered warrants (call) and margin loans provide leverage to investors, they differ in several key ways:

• Ownership: With margin loans, you own the actual stock. With covered warrants, you have the right to buy the stock at a strike price, but don't own it until exercised.
• Maximum Loss: With margin loans, losses can exceed your initial investment if the stock price falls significantly. With covered warrants, your maximum loss is limited to the amount you paid for the warrant.
• Time Limit: Covered warrants have an expiration date - if not exercised or sold before expiration, they become worthless. Margin loans don't expire but require interest payments.
• Interest Costs: Margin loans require paying interest on the borrowed amount. Covered warrants don't require interest payments, but the premium includes time value that decays as expiration approaches.
• Leverage: Covered warrants typically offer higher leverage ratios than margin loans, meaning you can control more exposure with less capital.

For a detailed comparison, read our article on Covered Warrant Call vs Margin Buying.

How to buy warrant?

IPO (Initial Public Offering): Before the covered warrant listing, the issuer will have an IPO pre-sell session. You can buy the warrant in the IPO session, but this is not recommended for the following reasons:

• Investors cannot sell warrants before the listing
• The IPO price is fixed but the underlying price changes every day. The IPO price might be lower or higher than the listing price

After Listing: We recommend buying/selling warrants after listing because investors can decide the time and value of their trades. You can buy warrants in your mobile or computer via web or app after the listing. Selling warrants works like selling stocks with T+2 settlement (transaction date plus 2 business days). Learn more about when you can sell covered warrants and check out our Getting Started Guide for beginners.

How to select issuer?

When selecting a covered warrant issuer, consider factors such as the issuer's reputation, financial stability, market experience, product quality, pricing transparency, and customer support. Look for issuers with a strong track record, competitive pricing, clear terms and conditions, and comprehensive educational resources.

Phu Hung Securities (PHS) stands out as a premier issuer with institutional-grade expertise, transparent product design, and comprehensive investor education. Learn more about why choose PHS for your covered warrant investments.

How much money do I need to start trading covered warrants?

The amount you need depends on the warrant price and minimum trading lots required by your broker. Since covered warrants provide leverage, you can gain exposure to an underlying asset with less capital than buying the asset directly. However, it's recommended to start with an amount you can afford to lose, as warrants can expire worthless. Many brokers have minimum deposit requirements, so check with your broker for specific details. Use our Warrant Screener to find warrants that fit your budget and investment goals.

Can I exercise a warrant before expiration?

In the Vietnam market, only European-style warrants are available. European-style warrants can only be exercised on the expiration date, not before. This means you must wait until the expiration date to exercise your warrant, unlike American-style warrants (which are not available in Vietnam) that can be exercised at any time before expiration.

Should I exercise my warrant or sell it on the market?

In most cases, it's better to sell the warrant on the secondary market rather than exercise it, especially for European-style warrants. The market price often includes a premium (time value) that you would lose by exercising early. However, if you want to hold the underlying asset long-term and the warrant is in-the-money near expiration, exercising might be appropriate. Consider transaction costs and your investment objectives. Read more about when you can sell covered warrants and use our Theoretical Value Calculator to evaluate whether selling or exercising is more advantageous.

What factors affect warrant prices?

Several factors influence warrant prices:

• Underlying asset price: The current price of the stock or index the warrant is based on
• Strike price: The predetermined exercise price
• Time to expiration: Longer time remaining generally means higher premium
• Volatility: Higher volatility increases warrant value
• Interest rates: Impact the theoretical value of the warrant
• Dividends: Expected dividends on the underlying asset
• Market sentiment: Supply and demand in the market

Use our Theoretical Value Calculator to see how these factors affect warrant pricing, or read our guide on Evaluating Covered Warrants using the Black-Scholes Model.

If the underlying asset pays dividend, what's the impact on the warrant?

When the underlying asset pays a dividend, the covered warrant will automatically adjust the strike price and conversion ratio to keep the theoretical price the same. This adjustment mechanism can be understood as immediately reinvesting the dividend, so investors don't need to worry about the ex-dividend date or dividend payments affecting their warrant value.

What happens if my warrant expires out-of-the-money?

If a call warrant expires out-of-the-money (the underlying asset price is below the strike price), the warrant becomes worthless. You will lose 100% of your investment in that warrant. This is why it's crucial to monitor your positions and understand expiration dates. Never hold a warrant until expiration unless you're certain it will be in-the-money. Use our Expiring Warrants Tracker to monitor warrants approaching expiration, and learn more about Risk Management Strategies.

What is time decay and how does it affect my warrant?

Time decay (theta) is the rate at which a warrant's value decreases as it approaches expiration, assuming all other factors remain constant. As time passes, the warrant loses time value, which is the premium above its intrinsic value. This decay accelerates as expiration approaches. Time decay is one of the main reasons why long-term warrant positions can be risky - you're fighting against time if the underlying asset doesn't move in your favor.

Are covered warrants suitable for all investors?

No, covered warrants are not suitable for all investors. They are complex derivative instruments that require understanding of:

• Derivatives and how they work
• Market risk and leverage effects
• Time decay and volatility
• Your own risk tolerance and investment objectives

Covered warrants are best suited for investors who understand the risks, have experience with derivatives, and can afford to lose their investment. Beginners should thoroughly educate themselves and consider starting with small positions.

What tools should I use to analyze warrants?

Use these tools to make informed decisions:

• Warrant Screener: Filter and search warrants by various criteria (underlying asset, expiration, strike price, etc.) - learn how to use it
• Theoretical Value Calculator: Calculate the theoretical value of a warrant using the Black-Scholes model
• Price Charts: Analyze historical price movements and patterns on individual warrant pages
• Expiring Warrants Tracker: Monitor warrants approaching expiration

These tools help you compare warrants, identify opportunities, and assess risks before investing.

How do I choose which warrant to buy?

Consider these factors when selecting a warrant:

• Underlying asset: Choose an asset you understand and have a view on. Browse available underlying assets and their warrants
• Time to expiration: Match your investment horizon - don't buy warrants expiring too soon. Use our Expiring Warrants Tracker to avoid short-dated warrants
• Strike price: Consider your outlook - in-the-money, at-the-money, or out-of-the-money
• Liquidity: Check trading volume to ensure you can enter and exit easily
• Premium/Implied volatility: Compare with historical levels to identify value using our Calculator
• Leverage ratio: Understand how much leverage you're taking on

Start your search with our Warrant Screener to filter warrants by these criteria.

Should I set stop-loss orders for warrants?

Setting stop-loss orders can help limit your losses, especially given the leverage and volatility of warrants. However, be aware that:

• Warrant prices can be very volatile, potentially triggering stops during normal market fluctuations
• Gaps in trading (e.g., overnight or over weekends) can cause prices to jump past your stop level
• Low liquidity in some warrants may result in execution at worse prices than expected

If you use stop-losses, set them based on a percentage loss you're comfortable with, and regularly review your positions.

How often should I check my warrant positions?

Given the time-sensitive nature of warrants and their volatility, you should monitor your positions regularly - at least daily if you're actively trading. Pay particular attention to:

• Time remaining until expiration (especially within 30 days)
• Price movements of the underlying asset
• Changes in implied volatility
• Overall market conditions and news affecting the underlying asset

Set calendar reminders for expiration dates and consider automated alerts for significant price movements.