Martin Lee @ Sg
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Macquarie SiMSCI Warrants

This morning, Macquarie has listed on the Singapore Exchange, SiMSCI warrants which allows investors to take a leveraged view on movements in the broader Singapore share market using the SiMSCI as the underlying.

SiMSCI is the name of the futures contract for the MSCI Singapore index. You can read more about SiMSCI here:

SiMSCI Futures

Unlike the futures contract, Macquarie’s warrants allow you to take a leveraged exposure to the SiMSCI with no margin calls or forced selling, thus limiting your capital at risk. Macquarie has listed both call and put warrants, so you can potentially profit from both rises and falls in the market.

As the SiMSCI is a liquid and efficient futures market, it provides a live tradable market reference price for the warrants to track.

The liquid SiMSCI futures market means issuers will be able to hedge their underlying positions in the SiMSCI futures more efficiently.

Investors can see the live SiMSCI price at Macquarie’s homepage and also their dedicated live SIMSCI pricing page which includes a list of their current warrants.

The following warrants are the first being listed:

December 2010 expiries
Call SIMSCI370MBeCW101230 (MQ8W) exercise level 370.
Call SIMSCI385MBeCW101230 (MQ9W) exercise level 385.
Put SIMSCI380MBePW101230 (MR1W) exercise level 380.
Put SIMSCI365MBePW101230 (MR0W) exercise level 365.

March 2011 expiries
Call SIMSCI400MBeCW110331 (MQ7W) exercise level 400.
Put SIMSCI350MBePW110331 (MQ5W) exercise level 350.

At the time of this posting, SiMSCI (Nov 2010) has a value of 380.70.

Cash settlement amount for CALL = (Closing Level – Exercise Level)/Warrants per Share
Cash settlement amount for PUT = (Exercise level – Closing Level)/Warrants per Share

The seven listed warrants have a Warrants per Share value of 75.0002.

So for example, each MQ8W warrant with a call strike price of 370 will have an intrinsic value of (380.70-370)/75.0002 = $0.142666286. The quoted price is about $0.26.

Based on the current quoted prices, the Macquarie SiMSCI warrants have implied volatilities of 25+.

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