Put warrant The implied volatility of the underlying asset influences the time value of a warrant, as it reflects future price fluctuations and can change over time. Important points: Rising implied volatility increases the time value of a warrant (call and put). Falling implied volatility lowers the time value. The effect is particularly strong for at-the-money warrants and less pronounced for warrants that are considerably in the money. Note: higher implied volatility means a higher time value and more expensive warrants. If the implied volatility falls, the warrant value also falls.

Warrants are usually traded above their intrinsic value: the premium is called the time value. It reflects the chance that the warrant will increase in intrinsic value by the time it expires. Influencing factors for the time value: residual term to maturity implied volatility of the underlying asset interest rate level dividend expectations The time value is not constant and changes constantly depending on these factors.

Warrants can be traded on or off the stock exchange during their term. The issuer usually acts as a market maker and quotes buying and selling prices. Purchase/sale: investors buy at the ask price and sell at the bid price. The difference (spread) is a cost factor and should therefore be as low as possible. Note: in the event of high volatility or special events, the spread may widen or prices may be temporarily unavailable.

Warrant: Functionality and benefits

Warrants: an introduction to leverage products

Q: What is the difference between a cash settlement and delivery?

Cash settlement: the investor automatically receives the equivalent value of the warrant on the repayment date. This is standard for warrants on indices, currencies or commodities. Delivery of the underlying asset (physical delivery): the underlying asset is transferred to the custody account. Important: In the case of physical delivery, the investor must proactively initiate exercise or sell the warrant before expiry. Otherwise the warrant expires with no value, even if it is in the money.

Q: American vs. European option type

European exercise type: exercise only possible at the end of the term. American exercise type: exercise possible at any time during the term, which makes this type more valuable and usually more expensive than European warrants.

Q: What are warrants and how do they work?

Warrants are securitized derivatives that give the right to buy (call) or sell (put) an underlying asset (e.g. equities, indices, commodities, currencies) at a fixed price (strike) within a certain period of time. They enable investors to profit from price movements in an underlying asset with a small capital investment.

Q: What are the differences between warrants and options?

Warrants: Non-standardized products that are issued by banks or financial institutions. Conditions (underlying asset, term, strike) are determined by the issuer. Trading on stock exchanges and the issuer acts as market maker. Suitable for Retail clients as the minimum stake is very low. Options: Standardized derivatives with uniform base prices and terms. Trading on futures exchanges. No issuer risk. Not suitable for Retail clients, as the minimum stake is 100 equities or more. In addition, the option contract is terminated with the physical delivery of equities as standard.

Q: What are the risks associated with trading warrants?

Risk of loss: disproportionately high losses possible, in the worst case expiry with no value. Loss of time value: value decreases over time, even if the price of the underlying asset remains unchanged. Volatility risk: price depends heavily on the expected fluctuation of the underlying asset. Systematic risk: market movements, interest rate changes or political events can influence the value. Issuer risk: in the event of the issuer’s insolvency, there is a risk of total loss.

Warrants allow you to participate disproportionately in the performance of an underlying asset with just a small investment.

27 Mar 2026

Jérôme Allet

Head Public Distribution Switzerland – Global Markets Equity Derivatives

What are warrants?
Features of warrants
Price components of warrants – explained simply
Call warrant for rising prices
Put warrant for falling prices
Hedging through warrants
The price of a warrant is always on the move
Price influencing factors at a glance
Warrants: what else you should know
Advantages and disadvantages of warrants
Frequently asked questions
Conclusion: Small stakes, big impact

Warrants are securitized financial products that give the holder the right, but not the obligation, to buy (call warrant) or sell (put warrant) a certain underlying asset either:

within a certain period of time or
on a fixed date

at a predetermined price (strike).

Important features of warrants

Attribute	Attribute	Description	Description
Attribute	Leverage	Description	With a small capital investment, you can participate disproportionately in the performance of the underlying asset.
Attribute	Free choice of direction	Description	Depending on the expected market trend, you can bet on rising prices (call warrant) or falling prices (put warrant).
Attribute	Diverse options	Description	Equities, indices, currency pairs, interest rates or commodities, for example, can function as underlying assets.
Attribute	Flexible trading	Description	Warrants can be traded every trading day and offer high liquidity.
Attribute	Hedging	Description	Put warrants allow portfolios or individual positions to be hedged against price losses.
Attribute	Volatility factor	Description	Changes in the implied volatility of the underlying asset have a direct impact on the value of a warrant.
Attribute	Increased risk	Description	The lever can also work in the opposite direction, which leads to an increased risk of loss, but the maximum loss is limited to the invested capital.

Warrants at a glance

As one of the leading providers of warrants, UBS KeyInvest offers you a wide range of products on various asset classes and underlying assets.

To the warrants

Characteristic	Characteristic	Description	Description
Characteristic	Underlying asset	Description	The underlying asset is the reference value of a warrant and significantly influences its price behavior. Examples of underlying assets are equities, indices, currency pairs, interest rates or commodities.
Characteristic	Strike	Description	The strike (strike price) is the price at which the warrant holder can buy or sell the underlying asset. If the underlying asset is above the strike, a call warrant is in the money and a put warrant is out of the money – and vice versa. If the underlying asset corresponds to the strike, warrants are at the money.
Characteristic	Conversion ratio	Description	The conversion ratio indicates how many warrants are required to purchase one unit of the underlying asset. With a ratio of 10:1, for example, 10 warrants are required to buy one unit of the underlying asset at the strike.
Characteristic	Expiry	Description	Warrants have a predetermined lifespan and remain valid only until their specified expiration date (Expiration Day).
Characteristic	Exercise type	Description	A European-style warrant can only be exercised at the end of the term, whereas the American style can be exercised at any time during the term.
Characteristic	Repayment	Description	On expiry, warrants are repaid by cash settlement or by delivery of the underlying asset.

The price of a warrant is made up of the time value and the intrinsic value.

Intrinsic value

Intrinsic value of a call warrant

Difference between the price of the underlying asset and the strike, divided by the conversion ratio. Only positive if the price of the underlying asset is above the strike.

Formula: intrinsic value of call warrant = (current price of the underlying asset - strike)/Conversion ratio

Intrinsic value of a put warrant

Difference between strike and price of the underlying asset, divided by the conversion ratio. Only positive if the price of the underlying asset is below the strike.

Formula: intrinsic value of put warrant = (strike - current price of underlying asset)/Conversion ratio

Difference:

In the money: warrant has intrinsic value.
Out of the money: no intrinsic value.
At the money: underlying asset corresponds approximately to the strike.

Time value

Warrants are usually traded above their intrinsic value: the premium is called the time value. It reflects the chance that the warrant will increase in intrinsic value by the time it expires.

Influencing factors for the time value:

residual term to maturity
implied volatility of the underlying asset
interest rate level
dividend expectations

The time value is not constant and changes constantly depending on these factors.

Opportunities and risks of a call warrant

Starting point: An investor expects the Bull AG equity to rise in the coming months. He buys 100 call warrrants at CHF 8 each.

Total stake: CHF 800 (without fees)

Current price of the Bull equity: CHF 100

Features of the call warrant:

Underlying asset: Bull AG equity
Base price (strike): CHF 95
Maturity: in 6 months
Conversion ratio: 1:1
Price of call warrant: CHF 8 (= CHF 5 intrinsic value + CHF 3 time value)

Total stake: CHF 800 (100 call warrants at CHF 8 each; excluding fees)

Example scenarios at expiry	Example scenarios at expiry	Scenario 1 Underlying rises	Scenario 1 Underlying rises	Scenario 2 Underlying unchanged	Scenario 2 Underlying unchanged	Scenario 3 Underlying falls	Scenario 3 Underlying falls
Example scenarios at expiry	Price of Bull shares	Scenario 1 Underlying rises	110 CHF	Scenario 2 Underlying unchanged	100 CHF	Scenario 3 Underlying falls	90 CHF
Example scenarios at expiry	Value of Call Warrant	Scenario 1 Underlying rises	15 CHF (110 CHF - 95 CHF)	Scenario 2 Underlying unchanged	5CHF (100 CHF - 95 CHF)	Scenario 3 Underlying falls	0 CHF (kein innerer Wert)
Example scenarios at expiry	+/- Call-Warrant	Scenario 1 Underlying rises	+87,50%	Scenario 2 Underlying unchanged	-37,50%	Scenario 3 Underlying falls	-100%
Example scenarios at expiry	+/- Bull shares	Scenario 1 Underlying rises	+10%	Scenario 2 Underlying unchanged	+/- 0%	Scenario 3 Underlying falls	-10%

Scenario 1: underlying asset rises
The Bull equity rises by 10% to CHF 110. The call warrant has an intrinsic value of CHF 15 at expiry (price of underlying asset - strike).
Purchase price: CHF 8 → Profit: CHF 7 (+87.5%)
Leverage: the warrant rises almost 9 times faster than the equity.
Important: An exercise obligation may exist in the case of physical delivery. In-the-money warrants that are not exercised expire without value.
Scenario 2: underlying asset unchanged
The Bull equity remains at CHF 100. The call warrant still has an intrinsic value of CHF 5, but the time value of CHF 3 expires.
Loss: CHF 3 (-37.5%) per warrant
Break-even: equity would have had to have risen to CHF 103.
Conclusion: the time value decreases over time and falls to zero on expiry, which means that warrants are always a race against time.
Scenario 3: underlying asset falls
If the underlying asset falls, the call warrant loses disproportionately. If the Bull equity falls by 10% to CHF 90, the warrant expires without value, as the price is below the strike of CHF 95 and there is no intrinsic value.

Slide 1-3

This shows that, when prices fall, call warrants make disproportionately high losses. In the worst case (the warrant is out of the money on expiry), a total loss occurs.

Opportunities and risks of a put warrant

Starting point: An investor expects the Bear AG equity to fall in the coming months. He buys 200 put warrants at CHF 6 each.

Current price of the Bear equity: CHF 80

Features of the put warrant:

Underlying asset: Bear AG equity
Base price (strike): CHF 84
Maturity: in 6 months
Conversion ratio: 1:1
Price of put warrant: CHF 6 (= CHF 4 intrinsic value + CHF 2 time value)

Total stake: CHF 1200 (200 put warrants at CHF 6 each, without fees)

Example scenarios at expiry	Example scenarios at expiry	Scenario 1 Underlying falls	Scenario 1 Underlying falls	Scenario 2 Underlying unchanged	Scenario 2 Underlying unchanged	Scenario 3 Underlying rises	Scenario 3 Underlying rises
Example scenarios at expiry	Price of Bull shares	Scenario 1 Underlying falls	72 CHF	Scenario 2 Underlying unchanged	80 CHF	Scenario 3 Underlying rises	88 CHF
Example scenarios at expiry	Value of Put Warrant	Scenario 1 Underlying falls	12 CHF (84 CHF - 72 CHF)	Scenario 2 Underlying unchanged	4 CHF (84 CHF - 80 CHF)	Scenario 3 Underlying rises	0 CHF (no intrinsic value)
Example scenarios at expiry	+/- Put Warrant	Scenario 1 Underlying falls	+100%	Scenario 2 Underlying unchanged	-33,3%	Scenario 3 Underlying rises	-100%
Example scenarios at expiry	+/- Bear shares	Scenario 1 Underlying falls	+10%	Scenario 2 Underlying unchanged	+/- 0%	Scenario 3 Underlying rises	-10%

Scenario 1: underlying asset falls
The Bear equity falls by 10% to CHF 72. The put warrant doubles in value and has an intrinsic value of CHF 12 (strike - price of underlying asset) on expiry.
Stake: CHF 6 → Profit: CHF 6 (+100%)
In the event of hedging, the profit from the put warrant would have partially offset the loss on the equity.
Scenario 2: underlying asset unchanged
The Bear equity remains unchanged. The put warrant still has an intrinsic value of CHF 4 on expiry, but the time value of CHF 2 has been lost.
Loss: CHF 2 (-33.3%) per warrant
Break-even: equity would have had to have fallen to CHF 78.
Scenario 3: underlying asset rises
If the underlying asset rises, the put warrant loses disproportionately. In the example, the Bear equity rises by 10% to CHF 88 and is above the strike (CHF 84), and the put warrant expires with no value – total loss.

Slide 1-3

This shows that with warrants – whether call or put – the disproportionately high profit opportunities are always accompanied by correspondingly increased risks of loss.

Put warrants are not only used for trading, but also for hedging portfolios or individual positions against price losses.

Comparison with insurance: the purchase price of the put warrants corresponds to a premium that offers protection in the event of price losses. If there are no losses, the warrants expire with no value, but the investor profits from rising prices.
Scope of hedging:
- At the money: strike corresponds to the current price, more expensive, but comprehensive protection.
- Out of the money: strike is below the current price, cheaper, only takes effect in the event of major losses.

The price of a warrant is not a constant, but changes during its term. While the intrinsic value is influenced by price movements in the underlying asset, two influencing factors in particular affect the time value:

Residual term to maturity

Warrants with a longer residual term to maturity have a higher time value than shorter-term, identical warrants. Time decay describes the loss in value over time and is not linear, but accelerates as the expiry date approaches.

Important points:

Time decay is particularly strong for at-the-money warrants.
At maturity, the time value is zero and the price corresponds to the intrinsic value.
Only an increasing intrinsic value can compensate for the loss in time value.

Note: the longer the residual term to maturity, the higher the time value, which falls to zero by maturity.

Implied volatility

Put warrant

The implied volatility of the underlying asset influences the time value of a warrant, as it reflects future price fluctuations and can change over time.

Important points:

Rising implied volatility increases the time value of a warrant (call and put).
Falling implied volatility lowers the time value.
The effect is particularly strong for at-the-money warrants and less pronounced for warrants that are considerably in the money.

Note: higher implied volatility means a higher time value and more expensive warrants. If the implied volatility falls, the warrant value also falls.

In addition to the residual term to maturity and implied volatility, interest rate levels and dividend expectations also influence the time value of warrants:

Interest rate level: rising interest rates increase the time value of call warrants and reduce that of put warrants – and vice versa.
Dividend expectations: rising dividend expectations reduce the value of call warrants and increase that of put warrants; the reverse is true with falling dividend expectations.

Price losses can pay off twice with a put warrant

A sharp fall in the price of the underlying asset usually increases implied volatility. A put warrant benefits twice over: its intrinsic value increases and the time value also increases.

Conversely, a put warrant loses both intrinsic value and time value if volatility falls, for example if prices stagnate or rise slightly.

Not all warrants are the same. Repayment can be made either by cash settlement or by delivery of the underlying asset. With regard to the exercise type, a distinction must be made between an American and a European option type.

What is the difference between a cash settlement and delivery?

Cash settlement: the investor automatically receives the equivalent value of the warrant on the repayment date. This is standard for warrants on indices, currencies or commodities.

Delivery of the underlying asset (physical delivery): the underlying asset is transferred to the custody account. Important: In the case of physical delivery, the investor must proactively initiate exercise or sell the warrant before expiry. Otherwise the warrant expires with no value, even if it is in the money.

American vs. European option type

Trading of warrants

Warrants can be traded on or off the stock exchange during their term. The issuer usually acts as a market maker and quotes buying and selling prices.

Purchase/sale: investors buy at the ask price and sell at the bid price. The difference (spread) is a cost factor and should therefore be as low as possible.
Note: in the event of high volatility or special events, the spread may widen or prices may be temporarily unavailable.

Advantages

High potential return on capital stake (leverage)
High flexibility
Well suited for hedging
Tradable every trading day under normal market conditions

Disadvantages

High losses if the underlying asset moves in the opposite direction
Total loss possible on expiry
Daily loss of time value
Regular monitoring necessary
Issuer risk

What are warrants and how do they work?

What are the differences between warrants and options?

Warrants:

Non-standardized products that are issued by banks or financial institutions.
Conditions (underlying asset, term, strike) are determined by the issuer.
Trading on stock exchanges and the issuer acts as market maker.
Suitable for Retail clients as the minimum stake is very low.

Options:

Standardized derivatives with uniform base prices and terms.
Trading on futures exchanges.
No issuer risk.
Not suitable for Retail clients, as the minimum stake is 100 equities or more. In addition, the option contract is terminated with the physical delivery of equities as standard.

What are the risks associated with trading warrants?

Risk of loss: disproportionately high losses possible, in the worst case expiry with no value.
Loss of time value: value decreases over time, even if the price of the underlying asset remains unchanged.
Volatility risk: price depends heavily on the expected fluctuation of the underlying asset.
Systematic risk: market movements, interest rate changes or political events can influence the value.
Issuer risk: in the event of the issuer’s insolvency, there is a risk of total loss.

How do factors such as the term and base price influence the value of a warrant?

Influence of the term: the value of a warrant falls as the residual term to maturity decreases, particularly sharply shortly before expiry. At maturity, the value consists only of the intrinsic value, if any exists.

Influence of the base price: the base price determines what the holder would pay (call) or receive (put) when exercising the option. The distance to the current price of the underlying determines the intrinsic value.

What types of investors are warrants suitable for?

Warrants are classic leverage products. They enable investors to bet on rising or falling prices with little money. This means you can achieve a big impact with a small stake.

Warrants can also be used to protect your own portfolio against price losses. They therefore not only offer opportunities, but also options for hedging.

However, warrants are not suitable for everyone. You need a good understanding of the markets and should have precise knowledge of the risks. If you are familiar with these products, you can use them in a targeted manner as a tactical investment.

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Disclaimer

This publication is intended for marketing purposes only.

This material has been prepared by UBS AG or one of its affiliates (“UBS”). This material is only intended for the distribution permitted under the applicable law. It has not been prepared for the needs of a specific recipient. It is only published for information purposes and does not constitute an offer or an invitation to purchase or sell securities or associated financial instruments (“Instruments”). UBS accepts no liability (either expressly or tacitly) for the completeness or reliability of the information contained in this document, except for the information on UBS AG and its affiliates. The information should not be regarded by the recipients as a substitute for their own judgment. All the opinions contained herein may change without prior notice and contradict the opinions of other business areas of UBS due to the application of different assumptions and criteria. UBS is not obliged to keep the information up to date. UBS, its executives, employees or clients may have or have had a participation in the Instruments and may conclude transactions with them at any time. UBS may maintain or have maintained a relationship with the entities specified in this information. Neither UBS nor its affiliates, executives or employees are liable for losses resulting from the use of this information. Structured derivatives do not constitute participation in collective investment schemes. For this reason they do not require approval from the Swiss Financial Market Supervisory Authority (FINMA). As a result, investors are not entitled to the specific investor protection provided by the Swiss Collective Investment Schemes Act (CISA).

Structured products are complex and involve a high risk. The intrinsic value of the investment instruments depends not only on the performance of the underlying asset, but also on the issuer’s creditworthiness (credit risk), which can change over the duration of the product. In relation to any securities, currencies, financial instruments or other assets underlying a transaction to which this material relates, the values may fall as well as rise and past performance is not an indication of future performance. Before entering into any transaction, you should consult your own legal, supervisory, tax, financial and accounting advisors as you consider necessary. You should also make your own investment, hedging and trading decisions (including decisions regarding the suitability of this transaction) at your own discretion and based on your consultation with advisors as you consider necessary. Unless expressly agreed otherwise in writing, UBS does not act as financial advisor or fiduciary in any transaction.

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Contents:

Important features of warrants

Warrants at a glance

Opportunities and risks of a call warrant

Scenario 1: underlying asset rises

Scenario 2: underlying asset unchanged

Scenario 3: underlying asset falls

Opportunities and risks of a put warrant

Scenario 1: underlying asset falls

Scenario 2: underlying asset unchanged

Scenario 3: underlying asset rises

Price losses can pay off twice with a put warrant

Advantages

Disadvantages

Make an appointment

Call 0800 002 554

Disclaimer

Stay a step ahead of the market

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