What are Inline Warrants?

Inline Warrants are a type of structured product that entitles the investors to receive a pre-determined fixed payment at expiry.  At expiry, investors will receive HK$1 per inline warrant held when the underlying asset falls at or within the Upper and Lower Strikes (In-The-Range) or HK$0.25 per inline warrant held when the underlying asset falls outside the Upper and Lower Strikes (Out-of-The-Range). 

Due to the pre-determined fixed maximum payment at expiry of HK$1, an inline warrant should not be traded above HK$1.  Investors will suffer a loss by buying an inline warrant above HK$1.

Inline Warrants may be issued with a lifespan of six months to five years.  They may be bought and sold prior to their expiry on the cash market of HKEX.  At expiry, settlement is made in cash only. 

Inline Warrants are issued by a third party, usually an investment bank, independent of HKEX and of the underlying asset.

Features

Upper and Lower Strikes, with no knockout barrier,

In-The-Range (ITR): fixed payment of HK$1,

Out-of-The-Range (OTR): fixed payment of HK$0.25,

Maximum upside and downside is known at the time of investment,

Can be bought and sold before expiry or held until maturity.

Risks

Profit potential is capped by the pre-determined payment,

Maximum loss is limited to initial investment,

Trading above HK$1 may not reflect the true value of the inline warrant; any inline warrant trades executed at the price above HK$1 will not be recognized and will be cancelled by HKEX.