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Islamic Derivatives – How Warrants Work 


A. Basic Idea of a Warrant
  • Warrant = right (not obligation) to buy shares
  • Very similar to a call option only
  • Issued by the company, not traders


B. Does a Warrant Have Call or Put?
  • ✔️ Warrant = like a CALL option
    • Right to buy shares at fixed price
  • ❌ No “put warrant” in the usual sense
    • It does not give right to sell


C. Is There a Premium?
  • ✔️ Yes, but different from options:
    • You pay to get the warrant
    • Cost may be:
      • Paid directly, or
      • Included in another product (e.g. bond)
👉 So:
  • It behaves like a premium, but:
    • Not always shown separately
    • Sometimes embedded in price


D. How It Works (Step-by-Step)
  1. You receive or buy a warrant
    • Example: Right to buy shares at RM10
  2. Wait until future date
  3. Two outcomes:
  • If market price = RM15:
    • ✔️ Exercise warrant
    • Buy at RM10 → profit
  • If market price = RM8:
    • ❌ Do not exercise
    • Let it expire → loss limited to cost of warrant


E. Key Difference from Call Option
  • Call option:
    • Buy shares from another investor
  • Warrant:
    • Buy shares directly from the company
    • Company issues new shares


F. Simple Comparison
  • Warrant:
    • ✔️ Right to buy
    • ✔️ Issued by company
    • ✔️ May have implicit premium
    • ❌ No selling right


G. Shari’ah Insight
  • More acceptable (in some views) because:
    • Linked to real shares
  • But still debated due to:
    • Gharar
    • Maisir


H. Final Takeaway
  • Warrant = company-issued call option (only buy right)
  • Has cost like premium, but may be embedded
  • Used to buy shares in future at fixed price

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