My warrant is expiring: what happens to my money?

A warrant is a security issued by an issuer. Buying it gives you a claim against that issuer. An ordinary call relates to rising underlying prices and a put to falling ones. You do not hold a standardized option contract from a derivatives exchange.

Our example is a fully paid call on a share with fixed expiry and cash settlement. It has no knock-out barrier. Turbo warrants and other special constructions can end differently and need their own rules. The word “warrant” alone cannot determine the payout.

During its life, the price combines intrinsic and time value. Intrinsic value is the positive distance from the strike adjusted by the ratio. Time value reflects the remaining opportunity for a favourable move. That extra time component disappears at expiry.

Keep the same assumptions across scenarios: a €100 strike, 0.1 ratio, purchase price of €1.20 per security and 100 securities bought. The purchase cost is €120. We ignore fees, currency conversion and extraordinary adjustments.

For this simple cash-settled call, assume the payout per security is the positive difference between the contractual share reference price and the strike, multiplied by 0.1. If the reference is not above the strike, payout is zero, never a negative amount.

At €120 the call is in the money: (€120 − €100) × 0.1 = €2 per security. For 100 securities, you receive €200 and make €80 against your €120 purchase. At €110 the payout is €1 per security, or €100 in total. Despite positive intrinsic value, you lose €20.

At exactly €100 the call is at the money with zero intrinsic value in this formula. At €90 it is out of the money. Either way, the payout is zero and the €120 purchase cost is lost. The share itself does not need to become worthless.

The last dealing day is the final chance to sell through the relevant venue. Its cut-off and any off-exchange dealing hours can differ. A quote still visible in a portfolio does not prove that you can sell at that price.

On the valuation day or at the end of the exercise period, the contractual reference price is established. It might be an auction or specified closing price. The terms name the market, time and procedure. A share quote on a general app need not be the one used.

Payment follows valuation through the issuer and your custodian. For standard warrants described in its FAQ, HSBC says a positive amount is credited automatically within five banking days of the applicable exercise date; the last exchange dealing day is normally one banking day earlier. This is an issuer-specific example, not a universal timetable.

Cash settlement satisfies the claim with money. In our example, you neither receive nor buy shares. Delivery of the underlying or another process applies only if your own product terms say so.

Many ordinary warrants settle a positive expiry amount automatically. Voluntary exercise during their life is different and may require notices, cut-offs or fees. Do not transfer the exercise rules of an exchange-traded equity option or another issuer’s FAQ to your warrant without checking.

If your product is nearing expiry, retrieve its final terms using the ISIN. Find the payout formula, valuation day, relevant price, maturity and settlement method. The issuer and custodian can clarify product-specific procedures if the documents are unclear.

Selling before expiry is a separate price decision. Compare the executable bid, any remaining time value and transaction costs with the ask you originally paid. Our €1.20 purchase price is an assumption, not a current quote.

The fully paid ordinary warrant in the example has no separate CFD overnight financing charge. Interest rates and expected dividends may nevertheless influence its price during its life. Check any dealing and settlement fees with your broker.

A positive calculated payout is still a claim against the issuer, so issuer default risk remains. A buyer of this fully paid simple call can lose the invested amount plus charges; the stated payout formula creates no extra payment obligation. Other products and credit-funded purchases differ.