A warrant is essentially an option, giving the holder a right. Depending on the holder’s right, a warrant can be either a call warrant or a put warrant.
A call warrant gives the holder the right, but not the obligation, to buy the underlying asset at a 「strike price」 on or before a specified date (generally the warrant will be settled in cash).
A put warrant gives the holder the right, but not the obligation, to sell the underlying asset at a 「strike price」 on or before a specified date (generally the warrant will be settled in cash).
Investors can sell the warrants they hold before the expiration date.
Warrants are listed and trade (in round "lots") on the Hong Kong Stock Exchange. Settlement is made two days after the trading day (T+2). A warrant has a fixed code, as well as a series of symbols with special meanings for specific identification.
Take 「3512 SG-China Life @EC0505B」 as an example.
「3512」 means the trading code of the warrant on the Hong Kong Stock Exchange;
"SG" indicates that the issuer of the warrant is Societe Generale, the largest warrant issuer in Hong Kong;
"China Life" means that the underlying asset is the stock of China Life (2628.HK);
"0505" indicates that the warrant expired in May 2005; if it expired in September 2006, the number would be "0609", and so on; "B" indicates that the issuer, Societe Generale, has issued more than one China Life warrants due in the same month but with different terms, so it is used to indicate the difference;
"@" indicates that the warrant settled in cash instead of with China Life's stocks upon expiration; if "*" is used, it means that settlement is made with stocks;
"E" means that it is a European warrant; "X" indicates a special or non-traditional warrant (see its terms for details); an American warrant may not be marked with letters or may be specially marked with symbols;
"C" indicates a call warrant, and "P" is used for a put warrant.
From the above name, it can be concluded that the warrant is "a European call warrant with the code 3512, issued by Societe Generale, with China Life’s stock as the underlying asset, expiring in May 2005, and settling in cash".
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Risk Factors for Structured Products: Structured Products are non-collateralized products. If the Issuer and its guarantor are insolvent or default, investors may not recover part or all of the amount due. The warrants, inline warrants and callable bull/bear contracts are structured products which involve derivatives. Do not invest in them unless you fully understand and are willing to assume the risks associated with them. The price of the Structured Products may fall in value as rapidly as it may rise and investors may sustain a total loss of their principal invested. Callable bull/bear contracts have a mandatory call feature and may be terminated early, in such case, an investor may not receive any cash payment; or the residual value may be zero. You should conduct risk assessment for yourself and ensure that you understand the nature andrisks of the Structured Products and should, where necessary, consult your own legal, tax, accounting, financial and other professional advisers to ensure that any decision to invest in theStructured Products is suitable with regard to your specific circumstances and financial position. Before investing in the Structured Products, you should carefully review and understand theterms and conditions of the Structured Products, together with the financial statements andother information of the Issuer, as set out in our base listing document (including any addendum), and the relevant launch announcement and supplemental listing document.