The Sensitivity of FX warrants

For the sensitivity of FX warrants, please refer to the following formula:
(Change in Exchange Rate X Delta) / (Conversion Ratio X Minimum Tick Size of Warrants) x exchange rate of the base currency against HKD

If the quote currency of the linked currency pair is already in HKD, there is no need to convert back to HKD when calculating the sensitivity of FX warrants, investors may refer to the following simplified formula:
(Change in Exchange Rate X Delta) / (Conversion Ratio X Minimum Tick Size of Warrants)

Example 1: JPY/HKD Call Warrants

Strike Price HK$5.5 (per 100 yen)
Delta 30%
Conversion ratio 1
Warrant Price $0.18 (Minimum Tick Size is HK$0.001)

Assuming that every 100 yen rises from 5.2555 to 5.2855 against the Hong Kong dollar, the value of every 100 yen appreciates by 0.03 Hong Kong dollars.

Substitute these numbers into the formula:
(0.03X30%) / (1 X 0.001) = 9

In other words, if every 100 yen appreciates by 3 HK cents against the Hong Kong dollar, the theoretical price increase of the call warrant is 9 ticks, and the price of the warrant will rise from $0.18 to $0.189.*

*Assuming that the implied volatility and time values remain unchanged.

Example 2: CNH/HKD Put Warrants

Strike Price 1.05 HKD
Delta 20%
Conversion ratio 1 to 10
Warrant Price $0.26 (Minimum tick size is HK$0.005)

Assume that the CNH falls from 1.08 to 1.065 against the Hong Kong dollar, i.e. it depreciates by HK$0.015 per 1 CNH against the Hong Kong dollar.

Substitute these numbers into the formula:
(0.015X20%) / (1/10 X 0.005) = 6

In other words, if the CNH depreciates by 0.015 against the Hong Kong dollar, the theoretical price increase of this put warrant is 6 ticks, and the price of the warrant will rise from $0.26 to $0.29.*

*Assuming that the implied volatility and time values remain unchanged.

The above information provided by J.P. Morgan Securities (Asia Pacific) Limited ("J.P. Morgan") is for information and discussion purposes only and is not intended as an offer, invitation, inducement, advice, recommendation or solicitation for the purchase or sale of any above-mentioned listed structured products or financial instruments nor does it constitute a commitment by J.P. Morgan or its affiliates ("J.P. Morgan Group") to enter into any transaction. Past performance is not indicative of future results. There can be no assurance that future results or events will be consistent with any opinions, forecasts or estimates herein.
FX warrants (or currency warrants) are non-collateralised structured products. 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. J.P. Morgan does not act as a fiduciary for or an advisor to any investor and is not responsible for determining the legality and suitability of an investment in any products or financial instruments by any prospective purchaser or existing holders. Investors must make their own risk assessment and where necessary, seek professional advises. Investor should not invest in these structured products unless they carefully read and understand the terms and conditions, risk factors and other information as set out in the relevant listing documents, and fully understand the features of the structured products and are willing to assume the risks associated with them.