KKeepingeeping ttrackrack ofof youryour BBeforeefore youyou investinvest inin WWARRANTSARRANTS ANDAND iinvestmentnvestment wwarrants...arrants... TTURBOURBO WWARRANTSARRANTS Double check that you can transact in Remember investing in these products real time and have access to information calls for knowledge, a high risk tolerance on buy and sell positions and their and constant monitoring of your position volumes. (especially with turbo warrants). A number of factors intervene in It is important to be familiar with their pricing aside from the performance of the characteristics and the way they work underlying instrument: , interest rates, before deciding on an investment. These are high-risk the course of time, dividend yield and, in some products if not carefully managed and movements in cases, exchange rates. And investors must learn price can quickly turn a profi t into a loss. to analyse the effects of all these factors together. If a regular warrant and turbo warrant are issued An increase in volatility (the price variability of with the same characteristics (underlier, the underlying asset) will push up the price of price, term, etc.), the price of the turbo should be traditional warrants. The reason is that if a security’s lower. This is because the barrier feature means an price fl uctuates sharply it is harder to predict what added risk for the investor. it will be worth on the expiry date. Hence there is The market offers a wide choice of warrants with more possibility that price movements will favour diverse profi les and underlying assets, so it is wise the buyer, and the seller will try to offset this by to compare terms before you invest. Information is demanding a higher premium. If volatility dies down, available from issuers’ websites, Sociedad de Bolsas DDividendsividends the opposite will be the case. (manager of the electronic trading system), the stock IInterestnterest rratesates exchanges where they are traded and the CNMV. So even though you are right about the direction of the underlier’s price, the value of your warrant BBarrierarrier can still be eroded by an adverse movement in some The aim of this factsheet is to inform the general public about different aspects of the securities markets. Its text is for information purposes only and, as such, cannot other factor, especially volatility. constitute a support for subsequent legal interpretations, which must rely exclusively TTimeime toto on the prevailing regulations. eexpiryxpiry “Factors intervening in the price formation of UUnderlyingnderlying regular warrants” Any part of this leafl et may be reproduced with due acknowledgement aassetsset ppricerice

The higher the ... Call warrant Put warrant Underlying asset price Volatility VVolatilityolatility Interest rates Dividends Investor Assistance Offi ce 902 149 200 Time to expiry Investors Division COMISIÓN NACIONAL DEL MERCADO DE VALORES The particular characteristics of turbo warrants mean Serrano, 47. 28001 Madrid · Fax 91 585 17 01 the way these factors act on price may vary in both size Passeig de Gràcia, 19. 08007 Barcelona · Fax 93 304 73 10 [email protected] and direction (positively or negatively) as the underlier’s Investor Assistance Offi ce price moves nearer to or further from the barrier. OPENING HOURS 9:00-19:00h, Monday to Friday 902 149 200 www.cnmv.es WWarrantsarrants aandnd TTurbourbo WWarrantsarrants

WWhathat aarere ttheirheir mmainain ...... andand theirtheir differences?differences? WWhathat aarere wwarrants?arrants? ppointsoints iinn ccommon...?ommon...? WARRANTS TURBO WARRANTS Warrants and turbo warrants are Warrants and turbo warrants share certain products, in that their price depends on basic features: Existence of NO. The right to buy YES. When the the performance of another asset (the barrier feature or sell is conserved underlying asset They are leveraged products: laying out underlier). to expiry. triggers the barrier, the just a small amount (the premium) can net turbo warrant expires, Warrants are tradeable securities whose the holder the same results as if he or she had losing all its value. holders pay a sum (the premium) giving them the bought or sold securities with a far higher market Leverage Extremely high Generally less high than right but not the obligation to buy (call warrant) or price. This also means a greater risk, since even with regular warrants. sell (put warrant) a given quantity of the underlying small changes in the price of the underlying asset asset (the warrant ratio) at a specifi ed price (the can end up magnifi ed in warrant prices (in both up Exposure to One of the factors Very high, close to underlying asset intervening in 100%. exercise price) during a preset time or on a preset and down directions). prices warrant valuation. date. Call warrants and, more so, call turbo warrants Turbo or knock-out warrants are contingent in are a bet on a rising market, when the price of nature: if the price of the underlying instrument the underlying asset is expected to climb. Put touches a predefi ned point (the barrier) during warrants, conversely, are when the buyer’s view the turbo’s life, the warrant is terminated ahead is “bearish”, i.e. he or she believes the value of the As leveraged products, warrants offer the of time. The holder, in these circumstances, underlying asset will fall. chance of a large percentage return on your cannot exercise his or her right and will lose the Warrants are traded in a dedicated Stock investment. In other words, you can earn a premium paid. Exchange segment through authorised fi nancial substantial profi t for relatively little outlay. They are issued at an exercise price lower (call intermediaries. They are bought and sold in a There is also the chance that you could lose turbo warrants) or higher (put turbo warrants) similar way to shares, with the difference that a some or all of the money invested (in the case of than the current market price of the underlier. specialist is on hand to provide them with liquidity warrants, if they are valueless on the expiry date; In both call and put turbos, the barrier is usually under the terms set out in the prospectus. in the case of turbos, if the barrier is triggered). set at the same level as the exercise price. In general, warrant trades on Spanish markets are The early termination of a turbo warrant settled by netting, i.e. in cash, as described in the bars the investor from earning on favourable prospectus. movements in underlier prices between then and the expiry date. WWhathat kkindind ooff rreturnseturns ccanan I expect?expect?