Editor’s note: This article was first published in July 2013 and describes the Spanish warrant market at that time, including each issuer’s range of underlyings and expiries and BNP Paribas offering only European-style warrants; which banks issue warrants in Spain may have changed since. Warrants are leveraged products that can lose their entire value. This 2013 article is not investment advice.
Let’s start from the premise that warrants are probably among the most complex investment products (derivatives) there are, but used correctly they can also deliver very good returns while taking on less risk. Of course, to choose the ideal warrant we have to pick a reliable issuer, and unfortunately not all of them are.
As an active investor in this product who has tried different issuers (not all of them, of course), I can say that I would lean towards some and reject others outright.
The most recommended warrants
If we are going to choose warrants, let’s go for warrant “specialists”. The winner, without a doubt, would be Commerzbank, for its wide range of underlyings, including less popular shares and foreign markets, as well as a great variety of expiry dates, risk levels and diversity. Close behind would be Société Générale, which also has a wide range in this product, and finally BNP Paribas, although they only offer European-style warrants. As you know, these can only be exercised at expiry, not before, as American-style warrants can. This should not be a drawback, though, because a warrant will rarely be profitable by its expiry date.
The least recommended warrants
The loser on the list, until I have tried other banks that also issue warrants, would be CaixaBank‘s issues. Little variety and expiry dates that make no sense at all relative to the strike. For my part, I prefer not to trade with this issuer.
In short: if you plan to speculate or hedge a position with warrants, always choose Commerzbank, Société Générale or BNP Paribas, because with them you are more likely to find the price, term and structure you need.
Featured image: Norbert Nagel, CC BY-SA 3.0, via Wikimedia Commons.
