SINGAPORE - Now that covered warrants have been in the market for more than a decade, learning to trade them has been taken to a whole new level of sophistication.
Novice traders can get a head start by using their iPhones to play a game known as WarrantHero.
The game allows them to use real-time market information to simulate live warrants trading. But unlike other online trading simulations, it also enables them to track what the top traders in the game are doing and try to emulate their trading strategies.
To whet traders' appetite for playing the game, Macquarie Group is even offering a total of $30,000 in cash prizes to be given each week for the next three months to the top-performing warrant traders.
Mr Barnaby Matthews, the Singapore head of derivatives at Macquarie Securities, said: "There are many more investors that have at least some understanding about how warrants work. To take their understanding to a higher level, I think many of them need to practise their skills and also to learn from others."
Covered warrants are issued by financial institutions such as Macquarie.
They give investors the option over a short time frame to buy a pricey blue chip such as DBS Group Holdings or stock indexes such as the Hang Seng or the Straits Times Index.
They are cheap because an investor will typically need five or 10 warrants plus the "strike" price to buy a single share.
And like shares, the warrants themselves are also traded on the Singapore Exchange and, naturally, their price tracks the movements of the underlying share price.
Total annual turnover of covered warrants almost trebled from $10.6 billion to $28.2 billion on the local bourse between 2005 and 2007.
Since then, however, investors' ardour for the product has cooled, with turnover last year falling to $5.65 billion.
But Mr Matthews believes that interest in warrants trading will revive as retail investors become increasingly more active in the market again.
He said: "The average monthly turnover for the warrants market in the past 12 months ended July 2013 was $438 million. We expect this will increase over the coming year along with retail participation in the stock market as investor confidence continues to improve."
The game WarrantHero rests on a wider TradeHero mobile app platform. The latter offers access to stock markets across the globe, such as Singapore, London and Hong Kong, and now has 250,000 users, including 30,000 in Singapore.
"Many of the followers use the information they gain from the top performers to invest real funds in the market," Mr Matthews said.
In the past eight years, Macquarie has also sponsored a column in The Straits Times that focuses on the warrants market. It usually appears on the first Monday of the month.
Mr Matthews said: "The primary purpose of the column is to create awareness for the warrants market and to keep investors informed about the latest market happenings. It is good to have something that is non-biased and written by a journalist."
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