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Index warrants - American Put

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JRVN
Occasional Contributor
Hi guys, I am looking for an instrument that will give me an American Put option on the ALSI or Top40. I don't want to invest in knockout or reset warrants. Any suggestions? Much appreciated.
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10 REPLIES 10
JRVN
Occasional Contributor
OK so I'm assuming there are no such instruments available or none of you know of any?
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Not applicable
There are a couple of European puts (not knockouts)available on the SBK website, but no American options Ive seen. They all start with TOPSB*
Im assuming youve seen those already.
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JRVN
Occasional Contributor
Yes thanks, seen those. Really interesting that we don't have any american puts or calls on the index - wonder why? Thanks anyway!
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SimonPB
Valued Contributor
american or European makes zero real world difference .. they can be bought/sold as/when you want ..
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THRESHOLD
Super Contributor
Y, - In theory - the European warrant should be cheaper all things being equal. In practice - these things are so opaque that there is no way of knowing.
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JRVN
Occasional Contributor
Because european options can only be exercised on expiry the value of the options react differently from american options, especially with regards to the intrinsic value component. As american options can be exercised at any time one can get access to the full intrinsic value when in the money - with european options I don't see how one can get access to the full underlying intrinsic value without having the ability to exercise at this precise moment... Option writers know this and there is much less hassle in managing european options than american options - could this be the reason we're not seeing any american options?
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THRESHOLD
Super Contributor
The bank is in a much more secure position with an American warrant. The maths behind the American instrument must be quite a bit nastier to manage too. Since "we" never exercise these things - perhaps the European model is truer. Why pay for a right you will never benfit from?
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THRESHOLD
Super Contributor
I meant "maths benhind the European instrument is nastier..."
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SimonPB
Valued Contributor
yes you can only exercise at expiry, but you can sell whenever you want .. one would never exercise a warrant early anyways as you give away theta ..
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THRESHOLD
Super Contributor
Personally - I have no joy with these hopelessly complex instruments regardless of American vs European... They always find a reason way to decay at breakneck speed and ruin my sleep. Haven't touched them in years.
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