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Investment strategies with warrants with BBVA Trader

BBVA Trader, a platform developed by BBVA entirely conceived for and devoted to trading, allows users to invest in different instruments, including warrants, one of the most popular. Warrants are publicly traded derivatives that leverage an investment on an underlying asset. BBVA Trader allows applying different investment strategies based on its users’ goals, be it just investing, obtaining liquidity, securing capital or hedging risks.

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This strategy is trend-based. Investing with warrants offers the possibility of making a profit both in both bullish or bearish markets. The investor takes a position on an asset, based on how he expects said asset’s price to perform.

Other strategies that BBVA Trader allows its users to implement, seek to maximize gains from expected significant moves in security prices. Thus, through the so-called "straddle strategy", users, can purchase call and put options on the same asset simultaneously, with the same strike price and expiration date. It is used at times of great uncertainty, when a clear market trend cannot be established, but volatility is expected to be high. On the other hand, the “strangle purchase” strategy entails the simultaneous purchase of 'out of the money’ call and put options, which have the same expiration date, but different strike prices. Investors usually resort to this instrument at times of high uncertainty and market volatility.

Obtaining liquidity

The direct investment in the underlying asset immobilizes a great portion of the capital available for investing. To maintain the exposure of an asset’s portfolio while obtaining liquidity, as an investor you can sell your portfolio and purchase call warrants on the same underlying asset in an amount such that the same exposure or risk with respect to the underlying asset is maintained.

In this manner, you can free up capital without forgoing the potential future returns of investing in the underlying asset, while protecting your portfolio by limiting the risk of future losses to the invested premium. As a warrant’s expiration date draws nearer, if an investor wants to roll over his/her strategy, he/she can sell the warrants in his/her portfolio and buy other warrants on the same underlying asset with a later expiration date.

Securing capital

At times of uncertainty, investors seek to profit from eventual market rallies without compromising the capital they initially invested, i.e. securing the capital. And this is possible by combining warrants with an interest-earning deposit.

Risk hedging

The purpose of this strategy is to cut the market risk linked to a security portfolio. There is a way of hedging the risk by taking a position opposite to the existing one on the reference market, which means buying put or call warrants, depending on the asset. Risk hedges, depending on your needs, can be static – i.e. time-specific - or dynamic – i.e. time –varying-.

Investment strategies with warrants

With BBVA Trader, BBVA offers a platform exclusively designed for and devoted to trading. The website offers specialized contents for both BBVA customers and non-customers, including comprehensive market analyses from both BBVA and third parties.

The platform also contains a broad list of tutorials, including everything from explanations on how securities markets work, to explanations on how to perform a technical analysis to identify a trend change. Also, it offers manuals and courses to understand and manage tools such as BBVA Trader Pro, or simple user guides to carry out a broad range of transactions.