Index warrants are very similar to equity warrants. The major difference is that they are issued over an underlying index (like the S&P/ASX200). They are available in call and put varieties.
See Table 5.1 below for a list of indices that index warrants are available over.
Table 5.1 Index Warrants
| INDEX | WARRANTS AVAILABLE |
| S&P/ASX 200 | CALL / PUT |
| NASDAQ 100 | CALL / PUT |
| S&P 500 INDEX | CALL / PUT |
| NIKKEI 225 | CALL / PUT |
(Please note that the NASDAQ 100 & the S&P 500 Indices are based in the USA & the NIKKEI 225 index is based in Japan. Caution should be taken before trading warrants based on the indices of foreign markets. Their markets are completely different from our own.)
Index warrant codes are the same as equity warrant codes except the first three letters stand for the underlying index. Table5.2 below lists out the indices and their ASX codes.
Table 5.2 Index Warrant Codes
| INDEX | INDEX CODE |
| S&P/ASX 200 | XJO |
| NASDAQ 100 | ZQQ |
| S&P 500 INDEX | XSP |
| NIKKEI 225 | XNK |
Index warrants are available over an underlying index. As such they have an exercise level instead of an exercise price
The exercise level is expressed in points
All Index warrants are settled in cash.
To work out the amount of the settlement each index point is given a monetary value which is called the Index Multiplier.
Index Multiplier
The Index Multiplier is used to determine the settlement amount in cash. The amount of the settlement is worked out using the following formulas:
Call Warrant: Settlement Amount = Index Multiplier x (The closing level of the index - the Exercise Level of the warrant)
Put Warrant: Settlement Amount = Index Multiplier x (The Exercise Level of the warrant - the closing level of the index)
I will use the warrant XJOWOB below as an example.
| Warrant Code | XJOWOB |
| Underlying Index | S&P/ASX 200 (XJO) |
| Warrant Type | Index Call Warrant |
| Expiry Date | 28-March-2002 |
| Exercise Level | 3400 |
| Index Multiplier | $0.005 |
| Exercise Style | American |
| Index Closing Level | 3500 |
Settlement Amount = Index Multiplier x (The closing level of the index - the Exercise Level of the warrant)
Settlement Amount = $0.005 x (3500 - 3400)
Settlement Amount = $0.005 x 100
Settlement Amount = $0.50
In the above example, assuming that the underlying index closed at 3500 points on the date that the warrant expired, each warrant could be exercised. The holder would then receice a cash payment of $0.50 per warrant.
All other aspects of Index Warrants are exactly the same as Equity Warrants. Please see the pages for this information: