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1. Preamble 3. Use
2. Presentation 4. Examples of use

Preamble
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This Swissquote tool is based on option pricing calculations as defined by the Black & Sholes model and described in the Help section on “Warrant Full quote”. Please refer to this document for technical and calculation details.

Proposed figures result from calculations based on the Black & Sholes model and are only mathematically justified in the context of small entry parameter variations.
Graphical representation of calculated performance is only indicative in comparison with that of other warrants.
Imagined scenarios therefore probably differ from reality.
One simple explanation is for example that in reality, a change in the underlying price modifies the warrant’s supposed volatility.

Your buying strategy solely determines your final investment decision. However, you may use this tool to try and determine which among all available warrants will lose the least value over time. You are solely liable for the interpretation of the mathematical calculations offered by the “Warrant Chooser”.

Presentation
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This tools enables the comparison of different warrants’ price reactions to changes in several variable and price-determining parameters:

- underlying price
- remaining time to the expiry date
- implied volatility of the underlying
- rate of interest

Comparisons are displayed in performance terms, in percent gains or losses in the warrant compared to its current price and volatility.

Use
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Only warrants written on the same underlying asset can be truly compared.

1. Therefore, the market in which the underlying is traded must be selected first (“Select Market”).
Securities are distributed over 4 distinct markets:
  • Swiss market
  • American market
  • European market
  • Asian market

2. Selected the security in the second list (“Choose Underlying”).

3. Select whether your search should include calls, puts or both.


4. Implement a market trend simulation by applying variations to one of the 4 parameters listed at the bottom of the graph.

Underlying price: This factor simulates the desired (positive or negative) price performance of the underlying asset.

Time (days): This factor simply represents the number of days you wish to take into consideration for your analysis, or the number of days over which you wish to invest. This parameter affects the warrant’s inherent time factor and thereby bears a direct impact on the warrant’s price.

Volatility: Modifying this variable enables you to increase or decrease, in percentage points, a warrant’s volatility compared to its current volatility measure. The use of this variable is recommended if you anticipate a change in the underlying asset’s - and the warrant’s - volatility.

Interest Rate: The rate of interest is specific to each warrant, as the warrant’s expiry date and the underlying asset’s denomination currency are both taken into account for its calculation. The rate of interest is estimated for a selected period. The default value is set at 100%, meaning that the default projection banks on interest rates remaining unchanged for the period under consideration. If for example you anticipate a 5% increase in interest rates over the selected time period, enter the value of 105% and press Enter.

If all parameters remain at their default values, all warrant performance calculations will be equal to zero.

In “No Result” is displayed for a warrant, it means that its pricing parameters are too distant from the Black & Sholes model to be consistent with the latter. This does by no means imply that this warrant should be withdrawn from your analysis.

5. Monitoring the individual price trend of a warrant

You can select a single warrant by entering its symbol in the “Fix” field. The selected instrument will then constantly be highlighted in orange for easier recognition.

6. Sorting warrants

By using the sorting buttons on the window’s upper right-hand side, you may sort your warrants by: Symbol, Strike, Ratio, Price, Expiry and Volume

Instruments are then listed from left to right in increasing order.
You then only need to move the mouse’s pointer over the graph to find the warrant or warrants you are looking for (the little orange arrow at the bottom of the graph helps you in orienting yourself).

Examples of use
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You wish to find, among all warrants on ABB, a call warrant with less than 250 days before expiry and which record a maximum performance gain within 10 days if the ABB Reg. share price rose by CHF 5.

Application:
In " Select Market ", select Swiss Equity
In " Choose Underlying ", select ABB N
Select Call
Then you can:
- Either input your parameter values directly in the text fields located directly under each parameter name and hit the ENTER key at the end of every data entry, or
- Simply choose to move the cursor corresponding to the parameter you wish to modify.

In our case:
Move the “Underlying Price” up from CHF 30 to CHF 35.
Move “Time” up from 0 to 10.
Then click the “Expire” button to select all eligible warrants by the number of days remaining before their respective expiry dates.

Now move your cursor over the graph to see which is the first warrant from the left that corresponds to the selected criteria (expiry in more than 250 days). This will be the “benchmark” warrant.

Now you only need to select the best-performing warrant located to the right of the “benchmark” warrant in the graph.

This is only one example of how to use the Warrant Chooser. You are free to construct whatever scenario you desire.

Technical Help:

Some more technical help can be found in :
Swissquote > Help > Technical recommendations > JAVA Tools
Enjoy your trading!


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