Hi Guys...any of you more experienced guys able to offer a quick over view of warrants.
One of my shares HCEG isued warrants the other day. I trade through Selftrade and want to know a few answers

1..How should I get notified of the warrants situation..by Selftrade or by mail to my home address by HCEG?

2. Who do I sell and buy through ?

3..At what price can I take up those warrants?

4..At what date do I have to make that decision by?

5..At what stage am I able to sell any warrants I have bought?

any help gratefully received from you more knowledgeable ones

-- Buckets,

1..How should I get notified of the warrants situation..by Selftrade or by mail to my home address by HCEG? Depends on the circumstances in which they were issued - your broker really ought to notify you of a significant corporate action like the issue of warrants. If your shares are either certificated or held in a CREST account, HCEG should probably (also) notify you - if you have a nominee account with Selftrade, HCEG won't even know you exist, so you won't receive anything from them

2. Who do I sell and buy through ? Some online brokers will allow you to trade equity warrants, though you will have to sign an additional risk notice to signify that you understand the nature of the risk involved in dealing warrants. Selftrade may or may not offer this service - basically, you'll have to ask them.

3..At what price can I take up those warrants? Depends on the issue details - if the company has just released a stack of warrants onto the market, then you trade then at the market price, whatever that happens to be. If the company have made an offer, say 1 warrant for every 3 shares, then whatever price conditions they specify - often they will be free

4..At what date do I have to make that decision by? Same answer as 3 - depends on the conditions specified by the company

5..At what stage am I able to sell any warrants I have bought? Well, first of all, you need to be clear on the difference between selling the warrant (which you can do at any time, unless the company has imposed specific conditions on this, which generally they don't) and exercising the warrant (paying the specified premium or exercise price, to receive share(s) in exchange (which you can they sell, if you choose). As I said, you can usually sell at any time, though you should be aware that the market in equity warrants is notoriously illiquid - if you're trying to sell a large number, they can be quite hard to shift, and you will often have to take a discount on the posted MM's bid. If you are exercising, there are usually only certain periods when this can be done - and it is often quite difficult to do this through no-frills online brokers.

A couple of general points: Equity warrants are effectively long-dated call options, except that they have an effect on the underlying stock, which options generally don't - this is because the exercise of the warrants results in a dilution of the share capital (ie new shares replace the exercised warrants), though this is offset (to a greater or lesser degree) by the value of the premium paid to exercise the warrants.

Secondly, warrants tend to trade at a premium to the underlying share - for a share at 100p, a warrant with an exercise price of 50p should logically trade at 50p - it won't, it will be at say 55-60p, and premium of 10-20%. Also beware what happens when a share drops in price to the extent that the premium is squeezed. Using the same example, if the share price drops to 40p, the warrant might trade at 10p, a premium of 50%. This extra cost is the "time value" of the warrant - the extra value held in the warrant on the basis is might in the future have more value.

As expiration approaches, the price of the warrant tends towards (share price minus exercise price), ie the premium (the "time value") of the warrant is eroded - be aware of this, as you could hold a warrant in an appreciating share and still lose out because of the erosion of time value.

Finally, be aware that most equity warrants have been, for the most part, pretty poor deals in trading, often being priced at huge premiums to the underlying share.

However, they do have a number of advantages - most obviously being leverage. If the warrant is 10p and the share 50p, you can either buy 5 times as many warrants for the same money (and consequently achieve 5 times the profit or loss), or gain exposure to the same number of shares, for a fifth of the money.

And occasionally, they can sometimes be a spectacular success - the warrants of TDM went up something like 300% in a day recently

Buckets.
I hold HCEG and recieved notification from my Broker(Abbey National)Today.
We got 1 warrant for every 10 shares held as at 12-11-03.We can buy 1 share for every warrant at a price of 1.5p on the 30th june starting 2004 through to 2008.
hope this helps.
graeme.

In spite of the structure of a warrant and the regular reminders you will receive, it is rarely in anyone's interest actually to exercise warrants. This is because the warrants are traded too and the trading price of warrants will include time value, which will be lost as soon as the warrant is exercised. Therefore look to sell the warrants rather than exercise them, unless they trade with a huge spread of course, in which case it may be worth exercising and then selling the ordinary shares.

By exercise, I take it you mean hold until expiry?

-- washlander,

Not necessarily - as per Graeme.Alexander's post, you can exercise any time from 30/6/2004; conversely, you can hold to expiry, and still choose not to exercise (eg, if the warrant is underwater, ie if paying the exercise price costs more than buying the share, then you wouldn't exercise)

Exercising is a specific act - you choose to exercise and pay the premium (aka exercise price) in order to receive the designated number of shares. In this case, you would pay 1.5p for each warrant that you wanted to exercise and would get one share in return, with the exercised warrant being cancelled.

You don't have to exercise - you could sell the warrant at any time; you can exercise part and sell part; or you can let them lapse worthless at the end (if the selling value were less than the transaction cost, for example).

Why no more interest?