Covered Warrants

Introduction

Covered warrants give the investor the right, but not the obligation to buy (calls) or sell (puts) in the underlying asset. Their aim is to replicate the same financial exposure as buying (call) or selling (put) an asset such as a share, index, commodity or exchange rate at a predetermined price (strike price) on a predetermined date (expiry). The lifespan to expiry is usually between 3 months and 3 years from issue. If held until expiry, the cash value of the warrant (if positive) will be credited to the investor.

Covered Warrants enable investors to have a geared investment strategy. These can be traded through your [Share or Fund] or [SIPP] Accounts. Unfortunately, HMRC (Her Majesty's Revenue and Customs) do not allow covered warrants to be held within an ISA.

At Interactive Investor we offer a comprehensive range of covered warrants in partnership with Société Générale'(SG).

Why use Covered Warrants:

  • By trading both long (call) and short (put) positions you have the potential to profit from both price rising and falling markets
  • Access a huge range of markets including UK and International Equities, commodities and currencies
  • Covered Warrants trade just like ordinary shares but as they geared investments, investors gain the same level of exposure at a fraction of the cost
  • As you don't own the underlying asset Covered Warrants do not attract Stamp Duty (tax laws may change)
  • Your maximum loss is always limited to the initial amount invested, however, covered warrants are considered as high risk as the capital is fully at risk
  • You can buy and sell covered warrants on the London Stock Exchange (LSE)
  • As they trade just like ordinary shares our standard commission rates apply. See our full rates and charges

Covered Warrants Guides

Example Markets

EPIC Underlying Type Strike Expiry Parity Price
SA78 FTSE 100 Index Put 6,300 20-Jun-14 1,000
BidOfferChangeTrade
£0.0419£0.0509+0.00Buy
SA79
FTSE 100 Index Put
6450
20-Jun-14
1,000
BidOfferChangeTrade
£0.0644£0.0704+0.00Buy
SC43FTSE 100 IndexCall700019-Dec-141,000
BidOfferChangeTrade
£0.1193£0.1253+0.00Buy
SB30 BP Call 5.50 20-Jun-14 1
BidOfferChangeTrade
£0.0367£0.0467+0.00Buy
LC29 Tesco Call 5.00 18-Dec-15 1
BidOfferChangeTrade
£0.0556£0.0606+0.00Buy
SB15
Apple Call 600 20-Jun-14 100
BidOfferChangeTrade
£0.0388£0.0488+0.00Buy
SO85
Goldman Sachs
Call 250
18-Dec-15
100
BidOfferChangeTrade
£0.0152£0.0252+0.00Buy
SB95 S&P 500 Call 1800 20-Jun-14 100
BidOfferChangeTrade
£0.6120£0.6420+0.00Buy
GEF3
Nikkei 225 (Quanto)
Call 20,000
11-Dec-15
1,000
BidOfferChangeTrade
£0.5030£0.5140+0.00Buy
SB03 Gold Call 1500 30-Jun-14 100
BidOfferChangeTrade
£0.0081£0.0111+0.00Buy
SA73 Gold Put 1000 30-Jun-14 100
BidOfferChangeTrade
£0.0010£0.0040+0.00Buy
SY66BRENT FutureCall12012-May-1410
BidOfferChangeTrade
£0.0047£0.0077+0.00Buy

See the full list of covered warrants available from Societe Generale here.

Investing in Covered Warrants

Existing Customers

  • Login to your investment account
  • Under 'account admin' complete the appropriateness test by selecting 'Add the ability to trade complex products' link
  • Then use the ‘Buy’ button above relating to the product you wish to invest in

New Customers

If you have any queries please call our team on 0845 200 3637

Product Risks

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.

Our Partner

Societe Generale

SG CIB, the investment banking division of Societe Generale, is the world's largest listed products issuer, with a 20 year track record of providing an outstanding trading service. Each year, more than €10 billion is traded in SG listed products across 10 global stock exchanges (Paris, Brussels, Madrid, Milan, London, Frankfurt, Helsinki, Hong Kong, Tokyo and Singapore).

With the largest number of listed products in the world, SG enables investors to leverage all their investment objectives, using either of the three sub-families: Replication, Investment Strategies and Leverage.

In the UK, Societe Generale has been present in the Listed Products business since the opening of the Covered Warrants market by the London Stock Exchange in 2002. Today, Societe Generale is a major player in the Exchange Traded Products market.