Spread Warrant — Bear
A put warrant with its gains capped at a floor level.
Payoff at maturity
Move the parameters; the product formula and its building blocks are recomputed from the same engine that is tested against the workbook.
- Product
Value 0 %
Per 10'000 of nominal
| Underlying at maturity | Level | Value | Amount | Gain / loss |
|---|---|---|---|---|
| −30 % | 70 % | 20 % | 2'000 | −8'000 |
| unchanged | 100 % | 0 % | 0 | −10'000 |
| +30 % | 130 % | 0 % | 0 | −10'000 |
For leverage products the nominal stands for the initial underlying level; the amount is the value of a position that controlled 10,000 of underlying at the start. Premium, financing and time value are not included.
Data table and formulas
Spread Warrant - Bear (2110): value per unit at maturity for an underlying at 0 % → 20 %; 80 % → 20 %; 100 % → 0 %; 200 % → 0 % of its initial level.
| Series | Formula | 0 % | 25 % | 50 % | 75 % | 100 % | 125 % | 150 % | 175 % | 200 % |
|---|---|---|---|---|---|---|---|---|---|---|
| Long Put - ATM | 1 × max(strike − S, 0) | 100 | 75 | 50 | 25 | 0 | 0 | 0 | 0 | 0 |
| Short Put - OTM | −(1 × max(floor − S, 0)) | -80 | -55 | -30 | -5 | 0 | 0 | 0 | 0 | 0 |
| Product | min(max(strike − S, 0), strike − floor) | 20 | 20 | 20 | 20 | 0 | 0 | 0 | 0 | 0 |
Largest difference between the sum of the blocks and the product formula over the grid: 0.0e+0.
How it is built
Each block drawn on its own, then added. The last chart is the sum, and it is identical to the product line above.
- Long Put - ATM1 × max(strike − S, 0)
- Short Put - OTM−(1 × max(floor − S, 0))
- Productmin(max(strike − S, 0), strike − floor)
Largest gap between the sum of the blocks and the product formula on this grid: 0.0e+0. The same identity is tested for every product and scenario in the site's test suite.
Construction, as listed in the workbook
- Long Put - ATM
- Short Put - OTM (strike = Floor)
In plain English
A put bought at the strike and a put sold at the floor. The maximum payoff is strike minus floor, reached when the underlying ends at or below the floor.
As with the bull spread, the sold option reduces the premium and the sensitivity to volatility and time.
Chances and risks
Chances
- Cheaper than a plain put warrant.
- Defined maximum gain and loss.
Risks
- Gains stop at the floor.
- Total loss above the strike.
- Issuer credit risk.
Who it fits
- Investors with a moderate negative view or a targeted hedge.
Who it does not fit
- Investors expecting a crash, who would want the uncapped put.
Nearby on the map
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