I've just noticed that many people are asking what warrants are and how to trade them effectively. In fact, this is a quite interesting securities product but still relatively new to many market participants.

Simply put, what are warrants? They are a type of contract that gives you the right to buy or sell a security (usually stocks) at a predetermined price, called the strike price, before a certain date. You do not actually own the stock, but only have the right to buy or sell it. The advantage of warrants is that they allow you to profit from price differences without investing too much capital.

In the Vietnamese market today, the main type of warrants traded are secured warrants, issued by securities companies. These companies must hold a certain amount of stocks as collateral. This ensures safety for investors.

There are two main types of warrants: call warrants (allowing the purchase of the underlying asset) and put warrants (allowing the sale of the underlying asset). However, currently, the Vietnamese market only permits trading of call warrants.

Looking at the current market, there are about 110 warrant codes being traded. The underlying stocks are often from large companies like ACB, FPT, HPG, MBB, MSN, MWG, POW, SHB, STB, TCB. For example, CACB2102 warrant is based on ACB stock with a strike price of 19,323 VND. The price to buy this warrant is only about 1,490 VND, much cheaper than directly buying the stock.

What makes warrants attractive is leverage. If you invest 26 million VND in HDB stock that increases by 7%, you earn about 1.8 million VND. But if you use the same amount to buy the CHDB2201 warrant, you could earn 4.8 million VND from the same price increase. That’s why warrants are called high-leverage tools.

However, it’s important to understand that the risks are also higher. If the underlying stock price drops below the strike price at maturity, you will lose your entire investment. Therefore, you need a clear plan for entry points, exit points, and stop-loss levels.

When choosing warrants, I recommend selecting those with strike prices relatively lower than the current stock price. Also, a lower conversion ratio is better because it maximizes profit when you are in profit. Warrants with longer expiration dates also reduce risks from sudden volatility.

Another important point: only participate in warrants when you expect the market to rise. That’s the basic condition. Analyze the trend of the underlying stock price during the warrant’s validity period. If your prediction is wrong, you can lose quickly.

Legally, warrants in Vietnam are regulated by Decree 60/2015, Circular 107/2016, and Decree 155/2020. The minimum term is 3 months, and the maximum is 24 months. When warrants mature, if you are in profit, you will receive a cash payment of the difference (not converted into stocks like in some other countries).

The break-even point is a key concept in trading. It equals the purchase price of the warrant multiplied by the conversion ratio plus the strike price. For example, if you buy a warrant CHDB2103 at 800 VND with a conversion ratio of 8:1 and a strike price of 28,888 VND, the break-even point is 35,288 VND. The HDB stock must surpass this level at maturity for you to make a profit.

I see 2026 as a good opportunity to participate in warrants, but you must have full knowledge. The warrant prices are quite low, with a minimum trading volume of only 10, so anyone can participate with small capital. But remember, this product is not for impatient or undisciplined traders.

The best approach is to build a clear investment rule: know where to buy, where to sell, and where to cut losses. Properly allocate your capital among warrants, underlying stocks, and other products. For example, 15% for warrants, 50% for stocks, 20% for derivatives, and 15% cash.

Finally, always pay attention to the last trading day and maturity date. If near the maturity date the underlying stock remains below the strike price, you should cut losses early to avoid losing all your capital. What are warrants if not a tool to make money? But they can also cause you to lose money quickly if you’re not careful. Learn thoroughly before starting.