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Homepage  >   Our Business  >  Retails Clients  >  Covered Warrant

Covered Warrant (CW) is a kind of securities with collaterals which is issued by a securities companies. It grants the owner the right to buy or sell a securities to the issuer at a pre-defined price at a pre-defined time, or to receive the cash difference between the executed price and the market price at the pre-defined time.
There are 02 main types of CW:

Call: Is the type of CW that enables the owner to buy a number of securities at a pre-defined executed price (strike price) or receive the difference when the market price of that securities (settlement price) is higher than the strike price.
Put: Is the type of CW that enables the owner to sell a number of securities at a pre-defined executed price (strike price) or receive the difference when the market price of that securities (settlement price) is lower than the strike price.

Currently, there is only one type of CW which is the CALL CW with listed securities as collateral and right execution at maturity. The payment method is cash.

Terms Explanation
Call/ Put C (Call), P (Put)
Underlying Listed securities as collaterals 
Year Issued year
Round The issuing order of a CW which has the same underlying asset during the year:
• CFPT1901 is the 1st issuance of the FPT CW in 2019.
• CFPT1903 is the 3rd issuance of the FPT CW in 2019.
Name Description Example
Issuer The securities company that issues the CW RongViet Securities
Underlying Asset Listed equities that are determined by the Exchange FPT
CW Price The amount investors have to pay to own the CW VND 1,000/CW
Strike Price The pre-defined price that is used to determine profit / loss when the CW matures VND 50,000
Conversion Ratio The ratio between the CW and the underlying asset 2:1
Maturity Period Validity time of the CW 03 months
Last Trading Day 02 days before the maturity date of the CW 07/10/2019
Maturity Date Last day of the CW 09/10/2019
Type of CW Call or Put (at the moment only Call is valid) Call CW
Execution Type Europe or America (At the moment only Europe type is in place, meaning that the CW is only executed at maturity) Europe
Payment Time • Trading in the secondary market (listed on the Exchange): T+2 just like the regular listed stocks;
• Maturity: If the CW moneyness is in the money (ITM), the payment will be made on T+5 since the maturity date.
Final Settlement Price (at execution) 5-day-average price of the underlying asset before the maturity date of the CW. VND 60,000
Settlement Method Physical Delivery / Cash Settlement (At the moment only Cash is used) (60,000 – 50,000)/2 = VND 5,000/CW

Ví dụ: An investor buys 10,000 CW of FPT with the following information:

(Please note that this example only demonstrate the information and calculations for a CW, all related taxes and fees are not included)

Cash amount to buy 10,000 FPT CW: VND 10,000 * 1,000 = VND 10,000,000.

Because this is an EU type, the investor can only execute on the maturity date.

On October 09, 2019, instead of getting FPT shares, the investor will receive the following cash payment from Rong Viet: (60,000 – 50,000)/2 x 10,000 = VND 50,000,000.

The investor will make the profit of : 50,000,000 – 10,000,000 = VND 40,000,000.

In the case the final settlement price of FPT is VND 45,000 < strike price (VND 50,000), the CW will not be executed and the investor will lose the initial investment of VND 10,000,000 that was used to purchase the 10,000 CW.

Status Call Put
ITM (Profit) Final Settlement Price > Strike Price Final Settlement Price < Strike Price
OTM (Loss) Final Settlement Price < Strike Price Final Settlement Price > Strike Price
ATM (Even) Final Settlement Price = Strike Price Final Settlement Price = Strike Price
The CW right is only executed when the CW status is ITM when the CW matures:
Call CW: Payment Cash = (Final Settlement Price - Strike Price)/ Conversion Ratio * Volume of CW
Put CW: Payment Cash = (Strike Price - Final Settlement Price)/ Conversion Ratio * Volume of CW
In theory, the price of a CW composes of 02 parts: Intrinsic Value and Time Value:
Intrinsic Value: is the difference between the final settlement price and the strike price of the CW. This value fluctuates along with the final settlement price, and only when the CW moneyness status is ITM the intrinsic value is valid.
Time Value: is the difference between the price of CW on the market and the Intrinsic Value. The Time Value will depreciate over time and will reach 0 on the maturity date.
Factor Status Call CW Put CW
Stock Market Price Increase Increase Decrease
Strike Price Increase Decrease Increase
Time to Maturity Decrease Decrease Decrease
Stock Price Fluctuation Increase Increase Increase
Interest Increase Increase Decrease
Stock price of the collateral and the Right Execution Price: These are the key factor to determine the intrinsic value of the CW. The difference between these two will have a direct impact on the CW price.
Time to maturity: Reflects the time-value of the CW. The longer the time, the higher the value of the CW.
Stock Price Fluctuation: The movement of the stock used as collateral. If the stock has a high fluctuation, the possibility that the investor will make profit from the investment will be high (the possibility that there is a difference between the stock price and the execution price is high), and the price of the CW will also be high.
Interest: The movement of the interest rate will also determine the price of the CW. For example, when an investor purchase a Call CW, the investor delays the payment of the execution price until the maturity date. This delay help the investors save a portion of the fund compared to investing on the listed market and that portion can yield some interest. When the interest rate goes up, the total return of the investor will also increase. As a result, the investor will pay a higher price for the Call CW and lower price for the Put CW.
Low investment capital: The price of CW is usually low, so investors do not need a large amount of capital to participate.
High leverage: The return from CW might be higher than listed stocks due to a high leverage.
Example: An investor has a fund of VND 50,000,000 and the investor expects that the stock FPT will increase in the near future. The investor has the following options:
• Option  A: Buy 1,000 shares of FPT (VND 50,000 / share) or;
• Option  B: Buy 25,000 Call CW (Collateral: FPT share;  CW Price: VND 2,000 Unit; Conversion ratio 1:1, Execution Price: VND 60,000).
When the price of FPT increases to VND 65,000 / share, the investor’s return will be calculated as follow:
• Option A: Return = (65,000 – 50,000) * 1,000 = VND 15,000,000
Profitability = 15,000,000/50,000,000 = 30%
• Option B: Return = (65,000 – 60,000 – 2,000) * 25,000 = VND 75,000,000
Profitability = 75,000,000/50,000,000 = 150%
The return of 150% from CW is the effect of high leverage.
Maximum Loss Restriction: When the stock price is unfavorable, the investor can choose to forfeit the execution and incur the maximum loss that is equal to the CW price that the investor paid to own the CW.
No IM deposit required Unlike the Futures, investors do not need to make initial margin deposits to trade CW regardless of type of CW (Call or Put).
Convenient Trading & Settlement: CW is traded and settled similarly to the listed stocks, so investors can trade on their trading account easily.
Risk Management: From the investor’s point of view, in addition to the possibility of unlimited return, CW is also a financial product that provides hedging for investments in listed stocks.
Limited Time Horizon: All CW have a limited maturity time (at least 03 months and at most 02 years). At the time of maturity, investors cannot continue to hold the CW like stocks. They will either get cash payment or lose the initial investment in the CW.
Stock Price Fluctuation: The price of the stock used as collateral has a direct impact on the price of the CW. If the stock price is opposite of the investor’s expectation, the price of the CW can drop to 0 on the date of maturity.
Liquidity of the Issuer: The risk arise from the fact that the Issuer can go bankrupt or become unable to make payment at the time of right execution.
Leverage: CW is a financial investment tool which helps the investors to increase the return ratio. However, it also increases the loss ratio if the investor's forecast is wrong.
Primary: Register to buy CW at the time of issuance.
Secondary (CW listed on the HSX): investors can use their securities trading accounts to trade CWs.
CW trading guide is referred here.
Individual and Foreign Institutional investors will pay the tax of 0.1% when:

Time Tax
Before Maturity (Investor sells CW on the HSX) 0.1% x Matched price x No. of CWs
Before Maturity (CW is delisted) 0.1% x Re-purchase price of the Issuer x No. of CWs (before maturity date)
0.1% x Payment price set by the Issuer x No. of  CWs (after maturity date)
On Maturity Date (CW with  ITM) 0.1% x Price difference x (No. of CWs/ Conversion Ratio)
Example An investor bought 100 VNM CWs at the price of VND 9,000/unit, th conversion ratio was 2:1, and the execution price is VNd 123,000:
1. Before Maturity, the investor sold the CWs on the secondary market at the price of VND 10,000/CW
→ Tax: 10,000 x 100 x 0.1% = VND 1,000
2. Before Maturity, CW got delisted, the Issuer announced that the payment price was VND 11,000/unit
 Tax: 11,000 x 100 x 0.1% = VND 1,100
3. On Maturity Date, VNM market price was VND 140,000
 Tax: 140,000 x 100/2 x 0.1% = VND 7,000
Fee Schedule
Q1 Distinguishing among CW – Listed Stocks – Futures?
Item CW Stocks Futures
Type of market  Cash market Cash market Derivatives
Issuer Securities Companies Corporates The Stock Exchange
Life Time 03 – 24 months Until the corporate is bankrupt or delisted Current Month / Next Month / 02 last months of the 02 nearest quarters
Type of trade Price of CW Price of Stock The index points (currently the VN30 Index)
Foreign Ownership Limit No Yes No
Maximum Loss Price of the CW and fees (if any) Price of the stock and fees (if any) No limit
Transfer of asset Between the securities company and the investor Between investors Between investors
Trading fees Circular 128/2018 TT - BTC Circular 128/2018 TT - BTC Circular 128/2018 TT - BTC
Settlement Time • Secondary market: T+2
• Maturity: T+5 (if the CW status is ITM)
T+2 • T+0: Ownership recognized
• T+1:Profit / Loss settlement
Trading Bands Affected by the listed stock price • HSX: +/- 7%
• HNX: +/- 10%
• Upcom: +/- 15%
+/- 7%
Q2 Distinguishing Covered Warrant and Corporate Warrant?
Item  Covered Warrant Corporate Warrant
Issuer Securities Companies Corporates
Purpose - Providing investment tools and risk hedging tools
- Increasing revenues
Increasing Charter Capital
Collateral Various (ETF, stocks, etc.) Stocks
Scope Rights to trade listed stocks Right to buy additional issuance
After right execution Total outstanding shares unchanged Total outstanding share increase
Q3 When there is a corporate action, will the price of the CW adjusted?
No. The price of the CW on the market will not be adjusted when there is a corporate action (dividends, additional issuance, etc.) However, the execution price and the conversion ratio of the CW will be adjusted. The method and information disclosure when adjusting the CW will be stated in the Issuer’s prospectus.
Example: (Unit: VND)
Time June 25 June 26 VNM pay cash dividends (VND 3,000 / share)
Price of VNM 129,500 126,500
Price of VNM CW 4,500 4,500
Execution Price 118,000 118,000x(126,500/129,500) = 115,263
Conversion Ratio 2:1 2x(126,500/129,500) = 1.954
New Ratio 1.954:1
Q4 In which case is the CW suspended?
Similar to listed stocks, CW will be suspended in the following cases:
• The collateral is suspended.
• Natural disasters and other technical issues with the trading / payment system.
• Any case that the Stock Exchange deems necessary to protect the benefit of investors (Example: The Issuer fails to comply to risk management regulations, etc.).
Q5 What account can investors use to trade CW?
When trading CW listed on the Stock Exchange, investors can use their securities trading accounts.
Q6 Can investors use margin to trade CW?
No. According to regulations from the State Securities Commission (SSC) and the Ho Chi Minh Stock Exchange (HSX), investors are not allowed to use margin to trade CWs.
Q7 Can investors short-sell CWs?
Same principle as the listed stocks, investors are not allowed to short-sell. Investors must own the CW (buy the CW) before they can sell.
Q8 How long does it take for investors to receive payment in case of right execution?
When a CW right is executed, the payment will be made within 05 business days since the maturity date.
Q9 What happens if investors do not execute the CW right at maturity?
In the case the investor does not request to execute the CW right when the status is ITM, the Issuer still has to make payment to the investor.
Q10 Is the Issuer allowed to trade its own CWs?
No. The Issuer is not allowed to trade CWs that are issued by it.
Q11 Are insiders and related parties of the Issuer allowed to trade its CWs?
Yes. Insiders and related parties of the Issuer are allowed to trade its CWs. However, they need to disclose the information at least 03 business days prior to the trade.
Q12 Are Investors who own CWs entitled to dividends right / additional issuance right / vote right / AGM right?
No. Investors who own the CWs have no right over the stock that is used as collateral.
Q13 Who can issue CWs?
Only securities companies that meet the criteria regarding profitability, owner’s equity stated in the Decree No. 60/2015/ND-CP can issue CWs.
In addition, the Issuer can only offer CWs within the limit stated by the SSC. Specifically:
• For the collateral: The total number of CWs from all issuers must not exceed the limit compared to the total outstanding shares.
• For an issuance: The number of CW issued in a single issuance must not exceed the limit compared to the total outstanding shares of the collateral.
• For the Issuer: Total number of CWs issued and to be issued (excluding delisted and matured CWs) must not exceed the disposable capital of the Issuer. This limit is applied during the period when the SSC processes the approval for the CW issuance.
Q14 How to ensure the liquidity of the Issuer?
CW is a contract between the investor and the securities company that issues CW, in which the Issuer has the obligation to pay the profits (if any) to the investor. In order to ensure the rights of the investor and the Issuer’s ability to make the payment, Circular 107/2016/TT-BTC stated:
• Before the issuance, the Issuer must make a deposit of at least 50% of the total value of the CW. This deposit is kept at the custodian bank during the lifetime of the CW.
• Every day the Issuer must perform hedging measures for the current outstanding CWs and report to the Exchange. The purpose is to make sure that the Issuer is capable of making the payment to the investor
Q15 Responsibilities of the CW market maker?
With the main purpose is of providing liquidity for the market, the market maker will constantly trade on the market, and it must trade in the following cases:
• There is only a Bid / Ask order.
• There is no buyer / seller of the CWs.
• The price difference on the market exceed 5%. The price difference =  (Lowest offer price – Highest bid price) / Highest bid price.
The time for the market maker to perform its duties is during the continuous matching session (except for the first 05 minutes) with the following conditions:
• Minimum volume per order is 100 CWs.
• Price must not exceed the price difference of 5%.
• Orders must be valid for at least 01 minute.
Q16 In which case market makers are exempted from its duties?
Market Makers are exempted from its duties in the following cases:
• The stock used as collateral is suspended.
• The CW price calculated using the formula above is less than VND 10.
• The volume of CW in the market maker is less than 100, the Issuer will not need to place an offer order.
• When there is no outstanding CWs, the Issuer will not need to place a bid order.
• When the CW is being delisted, the Issuer will not need to place an offer order.
• When the CW price reaches ceiling price (excess bid), the Issuer will not need to place offer orders, when the CW price reaches floor price (excess offer), the Issuer will not need to place bid orders.
• When the price of the stock reaches ceiling price, the Issuer will not need to place offer orders for Call CWs nor bid orders for Put CWs, and vice versa.
• CWWhen the CW is ITM with 30% return or above, the Issuer will not need to place offer orders.
• 14 days before maturity.
• Under objective events such as natural disasters, fire, war, etc.
• Others with the approval from the SSC.
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