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Financial and commercial services Updated: 07 Mar 2017

BBVA Trader: Warrants, the intrinsic and temporary value

One of the stellar features of BBVA Trader, BBVA's platform for trading stocks, warrants and ETF, is its compelling training offering.

BBVA Trader screen in hands

So, if you have a particular interest in finding out how to trade warrants, BBVA Trader offers a comprehensive range of training modules – levels basic to the most advanced - that will help you make the best decisions.

What are warrants? A brief explanation

Warrants are publicly traded products that leverage an investment on an underlying asset, offering the possibility to obtain unlimited profits at a risk limited by the investment itself. These securities entitle their holders to buy (Warrant Call) or sell (Warrant Call) an underlying asset at a preset price on the date fixed beforehand.

Their main characteristics are the following:

  • Warrants are derivative financial products: their price depends on the price the so-called underlying asset.
  • They are traded in real time, in the Spanish Stock Market Interconnection System (SIBE), uninterruptedly from 9.05h through 17.30h.
  • They are issued in a standardized manner by a financial institution, which commits to guarantee the liquidity of its issues at all times.
  • The warrants market is subject to strict supervision standards that guarantee its transparency.

The price of the warrant, the premium

The price of the warrant, or “premium”, depends not only on the price of the underlying asset at all times, but also on how it is expected to evolve in the future. Thus, a warrant’s premium can be broken down as the sum of two factors:

  1. Intrinsic value: This value depends on relation between the asset’s market price and the warrant’s strike price.
  2. Temporary or extrinsic value: It is calculated based on other four factors, which are volatility, time until expiration, interest rates and dividends.
Warrant price

To calculate your warrant’s premium, click here.

If you want to learn more about this product, make sure to check this webinar by our BBVA Trader experts.

For more info on market operations, please visit BBVA Trader, your advanced, fast and intuitive platform, with rates adjusted to your level of operations.