I suspect there are many people like myself who are taking a great interest in the financial markets with the expectation to generate additional income in this way. Judging from information available on trading in the financial markets, it would seem that a large number of traders are in actual fact losing money.

My interest in warrants stem from the following key attributes of warrants.

Warrants can be traded without the need to exercise the option to buy the underlying share, thereby making them ideal as short term trading instruments.

Warrants are particularly suited to traders with a fairly short time horizon, mostly not more than six weeks.

One of the key attractions of warrants as a trading instrument is that they give "investors" the potential to maximize financial returns while strictly limiting the potential losses. Warrants offer an almost "unlimited upside" potential and can potentially multiply gains. The downside however is limited and traders can not lose more than they have invested.

Warrants are geared financial instruments and offer the potential for much larger gains than the underlying. Warrant prices are typically only a fraction of the price of the underlying and a relatively small outlay of capital provides exposure to a large amount of the underlying.

There are three basic trading strategies for warrants and these are;

www.waranttrader.co.za is only concerned with speculation with warrants.

                                                                                                                     Henning Botes, July 2008