MotionTrade Tips: Recognize the Risks of Structured Warrants Before Investing

Motiontrade (Photo: Okezone)

JAKARTA – MNC Securities is a securities company under the auspices of the MNC Group, whose majority shares are currently owned by PT MNC Kapital Indonesia Tbk. Not only providing stock investment services, MNC Sekuritas also provides a variety of capital market products that can be used as an alternative for investors to invest.

Structured Warrants are an investment product that provides the opportunity to profit from price movements of the underlying asset. However, like other financial instruments, this product also has a number of risks that investors need to understand before making a transaction. Understanding this risk is important so that investment decisions can be made wiser and more measured.

MotionTrade has summarized four risks of structured warrants that investors need to know, namely:

1. Market Risk

One of the main risks in Structured Warrants is market risk. Investors usually buy call-type structured warrants if they expect that the market will increase (bullish), and buy put-type structured warrants if they expect the market to fall (bearish). However, predictions of market movements are not always correct. If the market direction does not match expectations, the Structured Warrants owned may become worthless or be in an Out of The Money (OTM) condition. This can cause losses for investors.

2. Time Decay

Structured Warrants have a time limit until maturity. As time goes by, the time value of this product will continue to decrease. The closer the maturity date, the closer the time value will be to zero. For this reason, trading structured warrants does not need to wait until maturity.