4. Intrinsic Value of warrants

  • Theoretical price of warrants = Time value + Intrinsic value
  • Depending on the relationship between the warrant's strike price and the underlying asset's price, warrants can be classified to: out-of-the-money, at-the-money, and in-the-money. Only in-the-money warrants have intrinsic value above zero.
  • Take call warrants as an example: its intrinsic value is the difference between underlying asset price and strike price. Assuming other factors remain unchanged, if the underlying asset's price increases, the intrinsic value of the call warrant will increase, leading to a price gain of the warrant (see chart below). On the contrary, if the underlying asset's price falls, the intrinsic value of the call warrant will decrease, resulting in a price drop of the warrant.

The above is a hypothetical case of call warrants for the purpose of illustration only. Past performance is not indicative of future results. 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.


*Turnover of a warrant or CBBC has no direct relationship with the product's price. Investors should not use turnover as the only indicator when choosing a warrant or CBBC.