Warrants cost a fraction of the price of their underlying security and give the buyer the right (but not the obligation) to buy ("Calls") or to sell ("Puts") this underlying security at a predetermined price (the Strike or Exercise Price) on or before a predetermined date (the "Expiry" or "Completion" Date). The underlying securities can be shares, baskets of shares, commodities, international currencies or share price indices. The act of using the right given by the warrant is referred to as "Exercise". Warrants are classified as either American or European style, meaning that they can be exercised at any time during the life of the warrant (American style) or only on the expiry date (European style). Almost all of our warrants are American Style.The warrant investor gains economic exposure to this underlying security without actually owning it. Covered warrants are issued by financial institutions who define the characteristics of each warrant. They are listed on stock exchanges such as Stuttgart (EUWAX) or Frankfurt (Smart Trading). They can be traded like any share or bond. As the terms of each covered warrant are unique, it is important to read the Term Sheet of each warrant, available on this site. However, there are certain standard terms, which must be understood prior to investing in warrants.

The Underlying Security
The underlying security is the security over which the warrants are issued. The performance of this security is one of the key elements in determining the value of the warrant.

The Strike or Exercise price
The strike or exercise price is the price at which the warrant holder has the right to buy (in the case of a call warrant) or sell (in the case of a put warrant) the underlying security. X-markets continually updates its product range to provide investors with a choice of warrants by offering new strikes and maturities. The exercise price is fixed in the initial terms and conditions of the issue but can be adjusted following a corporate action by the underlying company, i.e. as a result of a share split. For further information, full adjustment details are given in each pricing supplement.

The Conversion ratio or Parity
The conversion ratio or ratio is the number of warrants required to control one unit of the underlying security. For example, a conversion ratio of 10:1 on a call warrant of DaimlerChrysler shares means that the warrant buyer needs to buy 10 warrants in order to gain exposure over 1 DaimlerChrysler share. While trading prices are quoted on a per warrant basis, the exercise price is quoted with reference to the underlying security (or securities). It is therefore important to know the conversion ratio before investing. The conversion ratio of a warrant may be adjusted following a corporate action by the underlying company, e.g. as a result of a capital reconstruction. For further information, full adjustment details are given in the Pricing Supplement.

The Expiry Date
The expiry date is the date on which the right to exercise lapses or, for cash settled warrants, the right is automatically triggered for in-the-money warrants.

Exercise and Settlement
To exercise a warrant means to exercise the rights attributed by the warrant. Hence, when a warrant holder exercises a call warrant, it means that he wants to buy the underlying security at the exercise price from the issuer. Alternatively, when a warrant holder exercises a put warrant, it means that he wants to sell the underlying at the exercise price to the issuer.

Further Information
Please refer to our brochure for complete information about warrants and the investment strategies they can be used for.

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