For investment properties, profitability is always one of the top criteria. And when investing in covered warrants (CW), understanding the statuses (Moneyness) is essential. So what is the status of the warrant? How many types of warrant status are there? PHS will answer for you right away!

What is the “Moneyness” status of the warrant?

The status of a warrant is used to describe the relationship between the exercise price (X) and the underlying security price (S) at any time when the CW exists in the market, investors will know the exercise. whether the right is profitable or not.

A warrant exists in 3 main Moneyness states:

• Profitable CW status (In the Money - ITM) 

The strike price is lower than the price of the underlying security (X < S)

• Break Even CW Status (At the Money - ATM) 

The strike price is equal to the price of the underlying security (X = S)

In the state of CW breakeven (ATM), investors still lose all costs spent when buying CW.

• Loss CW Status (Out of the Money - OTM) 

The strike price is higher than the price of the underlying security (X > S)

Important note when determining warrant status:

• The position of profit or loss when the investor makes a trade before the expiration date will be counted as the underlying warrant.
• Investors need to monitor and trade warrants according to the price list of the regulated exchange.

The warrant market thrives, with many opportunities as well as risks when participating. Investors can flexibly invest in warrants depending on their understanding and judgment of the underlying stock market and initial capital. Hopefully, the information shared above about warrants will help new investors understand and choose a safe and effective trading solution.