Covered Warrants

What are Covered Warrants?

Covered warrants are issued by large financial institutions who maintain buy and sell prices for covered warrants on the London Stock Exchange (LSE).

Covered warrants give the buyer the right, but not the obligation to buy (Calls) or sell (Puts) in a certain underlying asset, at a pre-determined price, on or before a pre-determined date.

How do Covered Warrants Work?

Covered warrants provide the same level of exposure as buying ordinary shares but you only pay a fraction of the cost of the underlying asset.

Just like shares covered warrants can be bought and sold at anytime, online or by telephone. Unlike shares they have a limited life span - between 3 months and 3 years at issue. After which the cash value (if positive) of the warrant is automatically paid out to the holder.

Covered Warrants Benefits

  • Direct access to a full range of covered warrants through TD Direct Investing's partner-ships with all the leading issuers of covered warrants.
  • Trade both long (call) and short (put) positions, giving you the potential to profit from both price rises and falls in the underlying security.
  • Trade in a wider range of markets with access to a wide range of UK and International Equities, commodities and currencies.
  • As a geared product investors gain the same level of exposure as buying ordinary shares but pay a fraction of the cost of the underlying stock.
  • Covered warrants are traded like shares.

How risky are Covered Warrants?

Before trading you should fully understand the nature of covered warrants and your exposure to the risk involved.

The geared nature of covered warrants means that a relatively small movement in the share price of the underlying asset will result in larger movements in the value of the warrant. Therefore, covered warrants provide the opportunity for greater returns than ordinary share dealing but also greater risks and potential losses. If you are in any doubt you should consult an Independent Financial Advisor.

What do Covered Warrants Cost?

Covered warrants are traded like shares and are charged at normal commission rates from just €15.00 online. See full rates and charges.

As you don't own the underlying asset and only cash is exchanged rather than shares, you would not be subject to the stamp duty that is usually charged on UK share purchases.

Which Account do I need to trade Covered Warrants?

Covered warrants can be traded on our Trading Account.

Please note that in order to trade in Covered Warrants you will be required to complete an Appropriateness Assessment. This will help us to assess whether you have the necessary knowledge and experience in order to understand the risks involved in dealing in Securitised Derivatives such as Covered Warrants.

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  • CAPITAL AT RISK: The value of your investments can go down as well as up. You may not get back all the funds that you invest.
  • WARRANTS: Warrants are not suitable for everyone. You should not deal in warrants unless you understand their nature and the extent of your exposure to risk.  You should be satisfied that they are suitable for you in the light of your circumstances and financial position.

The value of your investments can go down as well as up. You may not get back all the funds you invest.

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